Government bond yields are displayed on an electronic board in the lobby of the Yonhap News Agency building in central Seoul, in this Sept. 30, 2022 file photo. Yonhap

Korea will be included in a key global government bond index run by FTSE Russell, starting in November next year, the London-based organization has said, a decision expected to help it attract significant foreign investment.

The country will be added to the FTSE Russell's World Government Bond Index (WGBI) effective with November 2025 index profiles and phased in over a one-year period on a quarterly basis as its market accessibility level will be reclassified from 1 to 2, the organization said in a report released on Tuesday (local time).

The inclusion decision was made two years after the country was placed on its watch list.

"Several initiatives intended to improve the accessibility of Korean government bonds for international investors have been implemented by Korean market authorities, which have facilitated the fulfillment of the criteria for a Market Accessibility Level of 2," FTSE said.

With a market value of $29 trillion, the WGBI is a highly sought-after benchmark that would attract substantial capital inflows from global investors.

Korea is expected to attract as much as 90 trillion won ($67 billion) of foreign investment through the inclusion, officials and experts have said.

FTSE Russell notes a set of market reform measures by the Korean government as positive developments, including the extension of trading hours of the local currency, allowing third-party foreign exchange and the establishment of a settlement system with Euroclear Bank and Clearstream to improve access by foreign investors to its government bond market.

"FTSE Russell congratulates the Korean Ministry of Economy and Finance on its efforts to expand and encourage global investment in its local government bond market by implementing changes that have met the rigorous criteria for WGBI inclusion, as well as its ongoing commitment to addressing the practical feedback of international bond investors participating in its evolved market structure," the report read.

Korea welcomed the latest decision, noting that the announcement reflects global investors' confidence and trust in the country's economic policy direction.

"It is notable that Korean bonds are now considered to be in line with those of advanced nations," a senior presidential official told Yonhap News Agency over the phone.

"The government's efforts to bolster the country's credibility and maintain fiscal soundness appear to have played a significant role in the inclusion," the official added.

Finance Minister Choi Sang-mok also said in a statement that the decision indicates that the global financial market has highly evaluated the Korean economy's solid fundamentals and vibrancy, along with its fiscal soundness.

Choi added that Korea will continue to review and revamp related policies while expanding communication with global investors, ensuring that Asia's No. 4 economy can be stably included in the WGBI.

Korea and India are the only countries among the world's top 10 economies in terms of nominal gross domestic product that have not been included in the bond index. India will join the FTSE Emerging Markets Government Bond Index starting September 2025.

FTSE Russell is a subsidiary of the London Stock Exchange Group that produces, licenses and markets stock market indices. (Yonhap)