The Korea Financial Investment Association on the 27th held a bond forum to explore the 2026 bond and credit market outlook and investment strategies.
Kim Ji-man, senior research fellow at Samsung Securities, who released the 2026 bond market outlook and investment strategy, said, "Korea's economy is expected to see a sharp improvement from a growth rate of around 1% this year to 2.2% next year," adding, "Given that inflationary risks are latent and that financial stability conditions, including the real estate market, need to be checked, additional base rate cuts will, in effect, be difficult, so the Bank of Korea's base rate is expected to be kept on hold next year."
Kim added, "The 2026 government bonds issuance at 232 trillion won is a burdensome level, but the fact that Korea's government bond market will be included in the WGBI and that massive passive funds amounting to 80 trillion won will flow in between April and November 2026 is a big positive for supply and demand," noting, "Inflow of Japan-related funds will likely be large, including 16 trillion won from the Government Pension Investment Fund (GPIF)."
Kim went on, "Current bond yields are already reflecting the end of base rate cuts," and said, "Strategically, rather than making a directional bet on long-term bonds, which face high interest rate volatility risk at the moment, focusing on carry and roll-down within the 5-year-and-under sector will provide stable returns relative to risk."
Yun Won-tae, head of the asset strategy department at SK Securities, who released the "2026 credit market outlook and investment strategy," said, "Compared with this year, next year's credit bond issuance will increase slightly, but investment demand will instead decline, worsening overall supply-demand conditions," adding, "Accordingly, widening of credit spreads is inevitable, and spread volatility will also expand due to a weakening investor base."
Yun said, "Next year, as maturities of repo fund money that drove this year's market rally come due in concentration, the burden of sell orders will increase, centered on nonbank financial bonds within six months to one year."
Yun added, "The withdrawal of repo fund money will act as an additional supply-demand burden within the credit market."
Yun also assessed, "Polarization within next year's credit market will intensify further, and particularly, with the separate taxation benefit for high-yield funds ending at the end of 2024, demand for high-yield bonds is already slowing."
Yun stressed, "Policy responses are needed, such as reintroducing the separate taxation benefit for high-yield funds and revitalizing the qualified institutional buyer (QIB) system to support financing for small and midsize and mid-tier companies."