South Korea has failed to meet the qualifications to participate in Citigroup’s World Government Bond Index (WGBI) this year. A committee from Citigroup, Inc (NYSE: C) informed the Korean Ministry of Strategy and Finance of the decision on Monday.
Citigroup, Inc (NYSE: C)’s World Government Bond Index tracks bonds issued by advanced economies and is used by financial institutions around the world as a standard for bond investments. Inclusion of Korean bonds would have raised as much as $10 billion in new investment into the country. Korea applied to be included in the WGBI in 2009, but Citigroup, Inc (NYSE: C) deferred the decision in January and March until now.
The New York-based bank will hold a meeting in September to discuss the possible inclusion of Korea again, but it would take as long as six months for the country to be included if approved.
The decision from Citigroup, Inc (NYSE: C) will likely not have a significant impact on Korea’s bond index because investors largely expected that the country would not be included in the WGBI.
“The delay in Korea’s inclusion into the WGBI will have only a limited impact on the bond market,” said Park Jong-yeon of Woori Investment Securities. “Fiscal soundness has become the new standard for global bond investments due to the financial crisis in southern Europe, and this has made won-denominated bonds backed by fiscal stability and growth potential especially attractive.”
