Seoul added to FTSE's global bond index watch list

[Graphics by Song Ji-yoon]

South Korea has been added to the watch list for potential inclusion in the Financial Times Stock Exchange (FTSE) World Government Bond Index (WGBI) on Thursday, moving a step closer to joining WGBI next year.

FTSE Russell Group that manages WGBI, one of world’s three major bond indexes, announced Thursday that Korea will be placed on the watch list for a potential upgrade to market accessibility level 2 and for consideration toward inclusion in the FTSE WGBI.

“This follows announcements by South Korean market authorities of several proposed initiatives intended to improve the market’s structure and the accessibility of South Korean capital markets,” it said in a statement. “FTSE Russell will gather feedback from market participants as the proposed reforms are implemented to assess the practical experiences of international investors against the requirements for a market accessibility level upgrade.”

Korea being on watch list has allowed it to get closer to joining the WGBI that will be decided in September next year. WGBI measures the performance of sovereign bonds of 23 countries including the United States, United Kingdom, Japan, and China. The index is tracked by $2.5 trillion funds.

Korea Institute of Finance estimated earlier that Korea joining the global index will help bring in 50 to 60 trillion won in offshore funds into the Korean market for investment in government bonds. Joining the WGBI will also help lower yields on bond issuance and save 500 billion won to 1.1 trillion won in interest payment every year, the institute said.

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