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By Lee Min-hyung
Retail investors are on a buying spree of bonds, as they bet more on safer assets amid falling stock market sentiment here and abroad, data showed Monday.
According to data from the Korea Financial Investment Association, retail investors have purchased bonds worth 9.54 trillion won at the over-the-counter market from the beginning of this year to Aug. 12. This is more than twofold growth from a year earlier.
As the U.S. Fed and the Bank of Korea (BOK) are widely expected to carry out at least two more rate hikes in the latter half of this year, investor preference for bonds or any other forms of safe assets will remain in place throughout 2022, according to market analysts.
This is in contrast to the sentiment in the local stock market. They purchased stocks worth 24 trillion won on the benchmark KOSPI during the same period. This is a drop of more than 66 percent from the previous year when stock market sentiment reached its historic high.
"We maintain a strategy of capital gains by purchasing 10-year treasury bonds amid growing fears of an economic slump," KB Securities analyst Lim Jae-kyun said.
The year 2022 will also mark the first time that retail investors have purchased bonds worth more than 10 trillion won, according to data from the association.
"Prices here are expected to peak in the third quarter of this year, and there stands a chance that the prices rise higher than expected due to heavy rainfall and the upcoming Chuseok holiday, in which case the BOK may take additional rate hikes," the analyst said.
"We cannot rule out the possibility of a rate cut in 2023 due to recession fears," he said. "But given there is also a likelihood for another rate hike in 2023, we advise investors not to jump into a buying spree of three-year treasury bonds."
The three-year treasury yield hit a new high of 3.745 percent in June for the first time in more than a decade. It closed at 3.181 percent on Friday.
