One of the most dramatic examples of outflows from emerging markets last month came from South Korea, where foreign investors sold $2.6 billion worth of government debt, according to André de Silva, head of emerging-markets rates strategy at HSBC Holdings PLC in Hong Kong.
Investors looking for extra yield charged into South Korea’s highly liquid bond market earlier in the year, pushing the yield on the benchmark 10-year government bond as low as 1.35% in July, from 2.04% at the start of 2016.
Now that yields in developed markets are starting to rise, the need to diversify in South Korea is less compelling. The yield on the 10-year bond has risen back to 1.71%—albeit still below the yield of equivalent U.S. Treasurys, which stood at about 1.82% as of Monday morning in New York.