Foreign Bond Holdings Gap Between Asia and Europe Narrows to 0.4 Percentage Point by May 31

According to Financial Supervisory Service data released on July 9, the gap between Asian and European foreign investors' holdings in Korean bonds narrowed to 0.4 percentage point by end of May, from 4.7 percentage points in late December. Asia's share of total foreign bond holdings fell to 40.0% by May from 41.4% in December, while Europe's share rose to 39.6% from 36.7%. Over the five-month period through May, European investors recorded net inflows of 7.04 trillion won compared to only 500 billion won for Asian investors.

The gap compression reflects divergent regional flows following March's temporary market adjustment. Korean government bond yields surged after Iran strikes in late February, with the 10-year yield rising to 3.877% by end of March from 3.445% in late February, prompting broad-based portfolio adjustments across regions. Recovery momentum accelerated in April as the World Government Bond Index began including Korean debt at a 0.24% weight, with European investors showing noticeably stronger inflows than their Asian counterparts.