Korean bonds on track for WGBI inclusion in 2026
Authorities say 5-month delay aims to give global investors more time to prepare for Korean bond exposure
Korea's inclusion in the World Government Bond Index, a key global benchmark for sovereign fixed-income performance, has been confirmed, though the entry date has been postponed by five months, according to the Finance Ministry on Wednesday.
The timeline for the full integration into the WGBI, managed by Financial Times Stock Exchange Russell, remains unchanged, with completion still set for November 2026.
However, the initial inclusion has been shifted from November 2025 to April 2026. The inclusion will phase in on a monthly basis, not a quarterly basis.
'Inclusion will be phased-in over a shorter eight-month period, in eight equal monthly tranches, commencing with April 2026 index profiles and completed with November 2026 index profiles,' The London-based global index compiler said in its index review update released on Tuesday.
FTSE Russell announced its plan to add Korean sovereign bonds to the index in October 2023, following their placement on the watch list in September 2022.
The refinement of the inclusion strategy is driven by various factors, according to FTSE Russell, including feedback indicating that "monthly tranches would facilitate easier and more straightforward portfolio management for asset managers."
'Index users have indicated that they are able to add the full exposure of South Korea over a condensed time period if sequential monthly tranches are used,' it said.
This adjustment also aims to ensure that the full weight of Korea is integrated into the FTSE WGBI by November 2026, it added.
Korea is expected to become the 26th country included in the WGBI, with its weighting in the index standing at 2.05 percent, making it the ninth largest among other government bonds.
With the revised timeline, anticipated benefits of inclusion — such as increased fund inflows from advanced economies, reduced funding costs and alleviated pressure on the Korean won against the US dollar — are expected to face delays. The government previously estimated that WGBI inclusion would attract an additional $56 billion in offshore investor funds.
Financial authorities have emphasized that the change in the timeframe is intended to give investors ample preparation time and maximize the positive impact of the integration.
"The timing adjustment is primarily technical. Many investors highlighted the need for adequate preparation time to conduct tests, given that this represents their first venture into the Korean market,' said Kim Jae-hwan, director-general of International Finance at the Ministry of Economy and Finance.
Kim also noted that changes to inclusion timelines are not unique to Korea, referencing a similar situation encountered with China in the past due to its operational environment.
Addressing speculations regarding political uncertainties stemming from former President Yoon Suk Yeol's Dec. 3 imposition of martial law causing the delay, he ruled out this possibility.
'I think there's zero percent possibility,' he stated, adding that Japanese investors have expressed the need for more time for their complex procedures and testing before allocating capital into Korean bonds through the index.
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