Last Month's Bond Issuance Increased by 18 Trillion Won... Foreigners' Bond Investment Balance Hits Record High

Corporate and Government Bond Issuance Increase Impact Rises by 18 Trillion Won

[Asia Economy Reporter Minji Lee] Last month, the scale of bond issuance increased by nearly 18 trillion won compared to the previous month due to an increase in corporate bond and government bond issuance. As foreigners made large net purchases of government bonds, Monetary Stabilization Bonds, and bank bonds attracted by the high interest rates relative to the country's credit rating, the bond holdings balance reached an all-time high.

According to the 'June 2021 OTC Bond Market Trends' released by the Korea Financial Investment Association on the 8th, the scale of bond issuance last month was 91.1 trillion won, an increase of 18.2 trillion won compared to the previous month (72.9 trillion won). This was due to an increase in corporate bonds, financial bonds, and government bonds issuance. The outstanding issuance balance increased by 13.7 trillion won due to net issuance of corporate bonds, financial bonds, and special bonds, reaching 2,400.8 trillion won.

Corporate bonds issuance recorded 15.3 trillion won, an increase of 7.4 trillion won compared to the previous month, as companies' issuance demand slightly increased at the end of the half-year. Credit spreads slightly declined as institutional investors' demand continued due to favorable liquidity. The corporate bond demand forecast amount was 850 billion won across 9 cases. The total participation amount in the forecast was 12.668 trillion won, with a participation rate of 329%. This is an increase of 22.5 percentage points compared to the same month last year. Looking at credit ratings by corporate bond, AA and AAA ratings increased by 800 billion won and 700 billion won respectively compared to the previous month. During the same period, A-rated bonds decreased by 700 billion won.

ESG bonds issuance increased by 170 billion won compared to the previous month, totaling 9.31 trillion won. A total of 11.326 trillion won was issued, an increase of 3.4 trillion won. Green bonds totaled 1.049 trillion won, including Lotte Mulsan (400 billion won), Korea East-West Power (260 billion won), and Korea Investment & Securities (150 billion won). Social bonds used for housing funds or small and medium enterprise support totaled 6.725 trillion won, and sustainable bonds combining green bonds and social bonds totaled 1.54 trillion won.

Last month, OTC bond trading volume increased by 86.5 trillion won compared to the previous month to 500.4 trillion won due to increased volatility from interest rate fluctuations and increased issuance. The average daily trading volume was 22.7 trillion won, an increase of 900 billion won compared to the previous month.

Foreign investors made net purchases totaling 19.2 trillion won, including 12.7 trillion won in government bonds, 4.3 trillion won in Monetary Stabilization Bonds, and 1.9 trillion won in bank bonds, as the high interest rate level relative to the country's credit rating and arbitrage investment incentives continued. Foreigners' domestic bond holdings reached an all-time high of 188.9679 trillion won, an increase of 9.8 trillion won compared to the previous month (179.135 trillion won). The Korea Financial Investment Association stated, "Since mid-last month, reflecting expectations of an orderly normalization of monetary policy due to the decline in long-term U.S. interest rates and the Bank of Korea governor's inflation stabilization briefing mentioning the possibility of at least one rate hike within the year, interest rates rose across all segments."

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