Korean Investors Lose 98.1% in German-Rate Bets Gone Very Wrong
- About 8 billion won of products matured Thursday, more coming
- They cause big losses for individuals as sovereign yields drop
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South Korean investors in a derivative product tied to German sovereign bonds lost 98.1% of their principal, highlighting the danger of super-risky assets sold to individuals that regulators are now probing.
The product, whose value was linked to the German 10-year government note yield, caused such big losses because the yield on the benchmark fell sharply to around minus 0.6%, according to Woori Bank, which sold it. About 8 billion won ($6.7 million) of the four-month securities matured on Thursday. There was 127 billion won of such securities tied to German rates that were outstanding as of Aug. 7, according to the Financial Supervisory Service.