South Korea's FSS Warns Bond Investors of Principal Loss Risk; 100bp Rate Rise Could Trigger 17% Loss

According to South Korea's Financial Supervisory Service (FSS) on July 5, government bonds and other low-risk bonds do not guarantee principal preservation. Investors may incur losses if they sell before maturity due to market interest rate fluctuations. Long-duration bonds carry higher price volatility—a 100 basis point rate increase on a 30-year bond with 3% coupon can result in approximately 17% mark-to-market losses. The FSS cautioned that benchmark rate cuts do not directly translate to bond price gains, and retirees prioritizing capital preservation should carefully assess early-sale risks before investing in long-term bonds.
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