Funds flow into short-term bond ETFs as bond interest rates soar... WON Sheep Bond Plus Active ETF ranked 1st in 1-year return

Seoul = Yonhap News) Reporter Jeong Hoe-in = As the price volatility of long-term bonds increases due to a surge in bond interest rates at home and abroad, investment funds are flowing into short-term bond exchange-traded funds (ETFs), which have relatively low interest rate sensitivity.

Woori Asset Management announced on the 1st that as of the 30th of last month, according to the results of fund rating agency Zeroin, the rate of return for the past year of 'WON Shear Bond Plus Active ETF' was 3.28%, ranking first among 45 domestic short-term bond ETFs.

The 6-month rate of return was also the highest at 1.76%, and the rate of return since the beginning of the year was 2.58%.

The reason for the recent influx of funds into short-term bond products is the rise in bond interest rates.

When interest rates rise, existing bond prices fall, and the longer the maturity of bonds, the greater the price fluctuations due to interest rate changes.

Accordingly, in a situation where it is difficult to estimate the peak of interest rates, short-term bonds with a short maturity and relatively low risk of price fluctuations are attracting attention as a haven for investment funds.

In fact, the net assets of this ETF surpassed KRW 500 billion on the 18th of last month, two months after exceeding KRW 300 billion in July. As of the end of last month, net assets were 502.7 billion won, an increase of 346.4 billion won this year.

This product lowers interest rate sensitivity by investing mainly in high-quality electronic short-term bonds and commercial paper (CP) within 3 months of maturity, and seeks additional profits by including some high-quality corporate bonds and capital bonds.

Lim Seong-han, head of the Fixed Income Team 2 at Woori Asset Management, said, “Reducing the duration early on in preparation for the possibility of a base interest rate increase from the beginning of the year has contributed positively to ETF performance. As it is difficult to estimate the peak of mid- to long-term interest rates, reinvesting short-maturity bonds will be effective for the time being.”