Chaean Fund, Will It Become the Savior of the Frozen Cash Market?

[Asia Economy Reporter Minji Lee] As the Bond Market Stabilization Fund (BMSF), established by the government with a scale of 20 trillion won to stabilize the financial market, is set to be fully operational, attention is focused on whether it can relieve the tightly blocked bond issuance market.

According to the financial investment industry on the 6th, starting this week, IBK Asset Management, the lead operator of the BMSF, is expected to begin purchasing bonds. IBK Asset Management reportedly distributed the 3 trillion won received as the first capital call on the 1st to eight sub-managers, deciding the purchase scale by bond type. The main targets for purchase are bonds rated AA- or A1 and above, with maturities within three years.

The sub-managers include △Corporate bonds (Korea Investment Trust Management, Samsung Asset Management) △Specialized finance bonds (KB Asset Management, Hana UBS) △Bank bonds (NH-Amundi Asset Management, Eugene Asset Management) △Commercial paper (CP) and short-term bonds (Multi Asset, Shinhan BNP). They plan to select target bonds by sector and proceed with purchases.

The BMSF was initially expected to be fully operational from the 2nd. However, purchases were delayed due to disagreements between issuers and buyers over interest rates. Buyers, who had issued bonds at low rates in a low-interest environment with abundant demand, expected rates below the private sector benchmark this time, but issuers proposed issuance rates above the benchmark.

The market expects that the operation of the BMSF will reduce the unsold burden on issuers. In particular, as the BMSF is expected to cover about 50% of the refinancing volume, some of the corporate bonds worth 6.5495 trillion won maturing in April are anticipated to have refinancing pressure eased. However, since concerns over the impact of COVID-19 and downgrades in corporate credit ratings have not been resolved, it is judged that it will be insufficient to reverse the market sentiment.

Kim Eun-gi, a researcher at Samsung Securities, explained, "To reduce the unsold burden, corporate bond issuance with AA rating or higher and a three-year maturity, which fits the BMSF investment targets, will be made. Long-term bonds with maturities of five years or more must be filled entirely by market demand, so companies planning to issue corporate bonds this month appear to be shortening maturities to two to three years."

Originally, demand forecasts for corporate bond issuance by Daelim Industrial (200 billion won), SK Materials (100 billion won), Hanil Holdings (110 billion won), POSCO Energy (250 billion won), and Lotte Shopping (200 billion won) were scheduled to be announced from the 31st of last month. However, all of them are reportedly postponing issuance schedules to mid-April and considering shortening maturities to within three years. Among them, Lotte Food will conduct a demand forecast for corporate bond issuance worth 70 billion won on this day.

This content was produced with the assistance of AI translation services.