Korea failed to make it into Citigroup's World Government Bond Index (WGBI) this year. A Citigroup committee informed the Ministry of Strategy and Finance of the decision Monday.
The Citi WGBI is composed of government bonds issued by advanced economies and used by major financial institutions around the world as a standard for bond investments. Possible inclusion of Korean bonds had raised hopes of attracting more than US$10 billion in investment. Korea tried to be included in the WGBI since last year, and Citi discussed the matter in January and March but deferred the decision.
Citigroup plans to hold a meeting in September to discuss the inclusion of Korea again, but even if it gives the green light, it will take around six months for the actual steps to be taken. That means Korea would not be included in the WGBI until March next year.
But Citi's decision had no significant impact on Korea's bond market since investors expected it. Foreign investors are expected to continue purchasing Korean bonds. "The delay in Korea's inclusion into the WGBI will have only a limited impact on the bond market," claimed Park Jong-yeon of Woori Investment & Securities. "Fiscal soundness has become the new standard for global bond investments due to the financial crisis in southern Europe, and this has made won-denominated bonds backed by fiscal stability and growth potential especially attractive."
