Bond fund assets have been shrinking as weakness in the bond market continues amid rising government bond yields.
According to the financial investment industry on Wednesday, domestic bond public fund assets decreased from 91.8 trillion won ($67.5 billion) on December 1 to 88.7 trillion won as of December 15. Some 3.1 trillion won flowed out in just 11 business days.
The declining trend becomes more pronounced when looking back to last month, when government bond yields began rising in earnest. Fund assets largely remained above 100 trillion won from mid-September through late October, but fell below that level last month and have continued to decrease. Particularly since mid-November, approximately 10 trillion won has exited in just over a month.
This phenomenon tracks the rise in government bond yields. Treasury yields, which stood at 2.60 percent for three-year bonds and 2.96 percent for 10-year bonds on October 1, have climbed to record highs for the year, reaching 2.999 percent and 3.313 percent respectively on December 16.
Bond prices move inversely to yields. The declining attractiveness of existing bonds appears to have affected fund inflows. Rising government bond yields have been attributed to expectations that the Bank of Korea will hold its base rate steady for an extended period and increased government bond issuance.
The bond market has recently seen low trading volumes with no clear catalysts. Industry observers expect the market to seek direction this week while digesting major global economic indicators and the Bank of Japan's monetary policy meeting scheduled for Wednesday.
In contrast, equity funds are showing broad-based strength, reflecting the stock market's momentum. Domestic equity public fund assets entered the 80 trillion won range in late October when the KOSPI breached 4,000, and have been hovering in the low 90 trillion won range this month. However, assets have fluctuated as markets entered a correction phase amid concerns over an artificial intelligence bubble. Domestic equity fund assets surged from 90.2 trillion won on December 1 to 95 trillion won in about a week, before declining to 92.1 trillion won as of December 15, showing high volatility.
