Seoul: More than 4.4 trillion won (US$2.9 billion) in foreign capital has flowed into South Korea's bond market this week, financial authorities said Thursday, as the country began its phased inclusion in a key global government bond index managed by FTSE Russell. On Wednesday, the country commenced its eight-month inclusion in the World Government Bond Index (WGBI), a move authorities believe will help stabilize the bond and foreign exchange markets.

According to Yonhap News Agency, authorities reported that foreign investors purchased 4.4 trillion won worth of South Korean treasury bonds between Monday and Wednesday, with Japanese investors leading the charge. "The government will closely monitor capital inflows through a joint task force involving relevant agencies," stated Finance Minister Koo Yun-choel during a macroeconomic policy meeting attended by Bank of Korea Governor Rhee Chang-yong, and the heads of the Financial Services Commission and Financial Supervisory Service, as per the Ministry of Finance and Economy.

Authorities indicated that volatility in the government bond market has started to ease despite heightened uncertainty stemming from tensions in the Middle East, following an emergency buyback of 5 trillion won. The buyback was conducted in two tranches -- 2.5 trillion won on Friday and another 2.5 trillion won on Wednesday.