However, despite the rapid quantitative growth of Korea’s bond market in recent years, outpacing the stock markets, – there is no reliable index capable of representing the bond market like a stock index and allowing investors to compare the performance of the bonds they are investing with that of other financial instruments such as stocks. The absence of such a benchmark index has been a problem for market users.
| Bond trading volume in 2004: 1,792 trillion won (exchange-traded volume 378 trillion won) | 2.5 times larger than the stock trading volume (712 trillion) over the same period |
| Outstanding value of exchange-traded bonds at the end of July 2005: 713 trillion | 1.3 times larger than the total stock market capitalization (568 trillion won) |
Against this backdrop, KRX will first develop a composite bond index consisting of 8,400 listed bonds and a treasury bond index composed of actively-traded treasury bonds.
Other additional indexes will be developed as the trading volumes of special bonds, corporate bonds, and other bonds increase.
The composite bond index currently under development is a total yield index which, unlike other indexes, will be calculated according to the average price of the three top rated agencies in Korea, a move which should greatly enhance the fairness and utility of the index. KRX expects the index to be widely used for these reasons.
The treasury bond index will be computed and published on a real time basis so that market users can track the bond market movements at their convenience; as such, the index will be a significant help to market participants making their investment decisions.
Furthermore, these indexes can be used as the underlying asset for derivatives.
