Foreign Currency Bonds 2.7 Trillion Won Maturity Refinancing Concerns Until Next Month

US Tightening and Ukraine Risks
Global Interest Rate Volatility Expands
Bond Investor Sentiment Freezes

[Asia Economy Reporter Park Jihwan] The amount of foreign currency bonds (KP) issued by domestic companies maturing by next month reaches around 2.7 trillion KRW, drawing attention to whether refinancing issuance will proceed smoothly in the bond market. Recently, the global bond market has seen increased interest rate volatility and a contraction in bond investment demand due to the U.S. Federal Reserve's (Fed) early tightening moves combined with geopolitical risks between Russia and Ukraine.

According to the investment banking (IB) industry on the 11th, the total amount of foreign currency bonds (with maturities over one year) maturing from this day until next month is estimated at 2.265 billion USD (approximately 2.7169 trillion KRW). This month, the maturity scale of foreign currency bonds from financial institutions such as KB Kookmin Bank (215.9 billion KRW), Export-Import Bank of Korea (120 billion KRW), IBK Industrial Bank of Korea (120 billion KRW), and KDB Industrial Bank (60 billion KRW) was significant.

Among general companies, Korean Air (311.3 billion KRW), Samsung Heavy Industries (60 billion KRW), and Lotte GRS (36 billion KRW) follow in order. Next month, maturities of foreign currency bonds from financial companies such as Korea Development Bank (1.3195 trillion KRW), Export-Import Bank of Korea (356.4 billion KRW), NH Nonghyup Bank (60 billion KRW), Industrial Bank of Korea (30 billion KRW), Nongshim Capital (15.6 billion KRW), and Kookmin Bank (12 billion KRW) are pending.

Amid this, refinancing burdens are increasing as emerging market bond yields and supply-demand become unstable due to global financial market uncertainties. At the beginning of the year, global bond yields surpassed last year's highs amid accelerating U.S. monetary tightening issues, with volatility expanding. Recently, the U.S. 10-year Treasury yield surpassed the early last year's peak of 1.70% and reached around 2%, marking the highest level in 2 years and 3 months since November 2019.

In a rising interest rate environment, concerns over valuation losses due to bond price declines spread, freezing bond investment sentiment. For issuers, this means bearing higher issuance rates, acting as a negative factor that increases bond issuance costs. Additionally, geopolitical risks between Russia and Ukraine have intensified, causing capital outflows from emerging markets, which is another negative factor. The rise in the KRW-USD exchange rate also increases the burden of issuing foreign currency bonds.

An IB industry official said, "Recently, Kia succeeded in issuing 700 million USD worth of foreign currency bonds at a relatively low interest rate, confirming that global investment demand for Korean bonds remains sufficient," but added, "As global bond yield volatility increases, the refinancing burden for foreign currency bonds will gradually intensify."

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