Market Summary

Yield Movements

Between 1 March and 8 May, local currency (LCY) government bond yields in the Republic of Korea fell for all tenors, resulting in the entire yield curve shifting downward. Yields for short-term tenors fell 3 basis points (bps) on average, while yields for maturities of between 2 years and 50 years declined an average of 12 bps. The largest decline in yields was noted for the 20-year and 30-year maturities, which fell 15 bps each. The spread for the 2-year and 10-year tenors slipped to 15 bps on 8 May from 16 bps on 1 March.

Size and Composition

The Republic of Korea's LCY bond market grew 1.8% q-o-q in Q1 2019 with outstanding bonds amounting to KRW2,278.7 trillion (USD2.0 trillion) at the end of March on account of increases in the stocks of central government bonds and corporate bonds. Government bond market grew 1.9% q-o-q in Q1 2019 to reach KRW930.9 trillion at the end of March. The outstanding amount of LCY corporate bonds increased 1.8% q-o-q to reach KRW1,347.8 trillion at the end of March.

Policy, Institutional and Regulatory Developments

Effective 3 June, the Government of the Republic of Korea will cut taxes on stock transactions to support the secondary market for venture firms and promote venture capital. The trading tax for stocks listed on the Korea Composite Stock Price Index and Korea Securities Dealers Automated Quotation markets will be reduced by 0.05 percentage points each, for unlisted stocks by 0.05 percentage points, and for Korean New Exchange stocks by 0.2 percentage points to promote venture capital. A special tax for rural development of 0.15%, levied on Korea Composite Stock Price Index transactions, will remain unchanged.