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← Back to List2026.08.02#MacroeconomicSurvival#Duration

[Macroeconomic Survival Ch. 1] I Bet on Korea's Slow Growth, but the Market Refused to Follow My Timeline ​

The 2022 storm in which stocks and bonds fell together

I Invested in a Darker Future for Korea ​

Korea's future growth rate will be lower than that of the United States.

That was the thought in my mind when I bought the RISE KIS 30-Year Korean Treasury Bond Enhanced ETF. Despite the English word Treasury often evoking US government bonds, this fund invests in 30-year bonds issued by the Korean government.

Korea had achieved decades of extraordinary growth. I did not believe it could continue running at the same speed forever. As its growth engines weakened, I expected the Korean economy to slow before the US economy and the Bank of Korea to cut rates before the Federal Reserve.

My thesis fit neatly into a single line:

Slower Korean growth → earlier Korean rate cuts → lower long-term Korean yields → higher prices for 30-year Korean government bonds

I did not buy Korean government bonds because I was optimistic about Korea's future. I did the opposite: I tried to turn my pessimism about its long-run growth into a capital gain from bonds.

The logic felt persuasive. Persuasive logic has a way of making an investor bold.

I Underestimated One Small Word: “Enhanced” ​

My reason for choosing 30-year bonds was straightforward. When interest rates fall, longer-maturity bonds tend to rise more.

Bond prices generally move in the opposite direction from market rates. When newly issued bonds offer more interest, older bonds with lower coupons must become cheaper to attract buyers. When market rates fall, those older higher-coupon bonds become more valuable.

The measure that approximates a bond's sensitivity to changes in rates is duration. A longer duration magnifies the benefit of falling rates, but it also magnifies the damage from rising rates.

My chosen fund contained another lever.

“Enhanced” was not a decorative word in the product name. The ETF holds three Korean 30-year government bonds and borrows an additional amount equal to roughly 30% of the portfolio to buy more of the same basket. The structure can amplify gains when yields fall—and losses when yields rise.

I did not think I was buying a leveraged product.

But the 30-year maturity had already created the first lever through duration. The Enhanced structure placed a second lever on top of it.

Growth Slowed, but Rates Did Not Fall ​

The biggest flaw in my reasoning was compressing “growth slows” and “rates fall” into a single step.

Downside risks to Korean growth were indeed increasing in 2022. Inflation, however, was the more urgent problem. Even as the Bank of Korea projected slower growth, it continued tightening because inflation remained far above its target. By November 2022, the base rate had reached 3.25%.

I had omitted all the variables between slower growth and lower rates.

When inflation is high, a central bank cannot easily cut rates simply because the economy is weakening. A falling won and rapid tightening by the Federal Reserve also mattered. Financial stability and Korea's household debt added further constraints.

I had compared the long-run growth rates of Korea and the United States. Bond prices were not waiting exclusively for that distant future. They were reacting first to the inflation, exchange rates, and central-bank decisions directly in front of them.

My destination was far away. The market was dealing with the obstacle immediately ahead.

Three Different Funds, One Hidden Bet ​

The Korean 30-year government bond ETF was not the only bond fund in my account.

I also held BND, which covers the broad US investment-grade bond market, and LQD, which holds US investment-grade corporate bonds. A US aggregate bond fund, a US corporate bond fund, and a Korean government bond fund looked diversified across products, countries, and issuers.

In 2022, however, all three moved in the same direction.

  • BND returned approximately -13.1% for the year.
  • LQD returned approximately -18.0%.
  • The Korean 30-year fund, with its long duration and additional borrowing, was also hit hard by rising rates.

Only then did I see the common exposure hidden beneath the product names.

BND carried intermediate duration. LQD carried longer duration as well as corporate credit risk. The Korean 30-year fund carried far longer duration and the Enhanced borrowing structure. On the surface, I had divided my money among three products. Underneath, they all depended on one belief: interest rates would not rise dramatically.

I had diversified products, not risks.

That was the first important lesson 2022 left me:

Do not count the tickers in a portfolio. Identify the common force capable of breaking them all at once.

A Forecast That Is Too Early Can Hurt Longer Than One That Is Wrong ​

The view that Korea's growth engines are weakening is not necessarily wrong. Once inflation stabilizes and growth slows sufficiently, the Bank of Korea may cut rates. If long-term yields then decline, 30-year government bond prices may rise.

But “eventually” is not a complete investment thesis.

Even if the final direction of rates is correct, long-duration bonds can suffer severe losses if rates first move higher. No one knows whether a thesis will take months or years to materialize. If the interim decline forces an investor to exit, the eventual vindication belongs to someone else.

I had focused on the destination. I had not calculated the path, the cost, or the time I would need to endure.

More important than calling the direction was building a structure that could survive a forecast arriving far too early.

I Abandoned the Shield and Bought Time ​

The lesson of 2022 was not simply that bonds are unsafe.

Bonds offer different kinds of safety. Credit safety asks whether the US or Korean government will repay its obligations. Price safety asks whether the market value will remain stable during the period in which I need to hold or sell the asset. They are not the same.

A long-term government bond can be highly secure in credit terms and still experience enormous price swings because of its duration. What I actually needed was low credit risk and stability for money that might fund living expenses in the nearer future. I had mistaken one kind of safety for both.

With rates still rising, it was not time to fight back with even more duration. I first needed to buy time to survive.

I turned away from long-duration bonds and began studying SGOV, Korean CD-rate ETFs, and cash management accounts. I traded the promise of spectacular capital gains for short maturities and interest income that adjusted upward more quickly.

In the next chapter, I will explain how cash—an asset I had barely considered an investment—became the most important shelter in my account.

Sources Consulted ​

🌊 [Macroeconomic Survival Series]

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