National Policy Banks, Strong Drive to Secure Liquidity

San-eun, Su-eun, and Others Successfully Issue Global Bonds in Succession... Proactive Response Amid Continued Interest Rate Rise Forecast

[Asia Economy Reporter Song Hwajeong] Amid ongoing interest rate hikes and increasing global economic uncertainties, policy banks are proactively securing liquidity.

According to the Korea Development Bank (KDB) on the 27th, the global bond issuance worth a total of $300 million (approximately 380 billion KRW) on the 25th, targeted at investors in Asia and Europe, attracted orders exceeding $1 billion, more than three times the issuance amount, achieving great success.

The bonds issued this time have a 3-year maturity and fixed interest rate. Despite the cooled investment sentiment in the overseas bond issuance market, they were issued with a new issue premium (NIP) around 5 basis points, which is better than the recent Korean bond market formation level (10~20 basis points). Most investors were high-quality entities such as SSA (central banks of various countries, international organizations, and policy financial institutions), multinational corporations, and banks. Even though the offering was limited to investors in Asia and Europe excluding the United States, investment orders reached three times the issuance amount.

A KDB official explained, "Despite the market volatility caused by the impact of U.S. interest rate hikes and concerns over supply chain disruptions from China, we secured the necessary liquidity in a timely manner through rapid public bond issuance."

Earlier, the Export-Import Bank of Korea (KEXIM) also succeeded in issuing global bonds worth a total of 1.5 billion euros (approximately 2 trillion KRW) on the 18th. This is the largest euro-denominated public offering by a Korean institution to date. The euro bonds consist of 550 million euros of 2-year floating rate notes and 950 million euros of 3.5-year fixed rate notes. The 1.5 billion euros raised will be directly invested in renewable energy projects and large-scale secondary battery production facilities primarily conducted by Korean export companies in the European region. Following the issuance of a $3 billion global bond in January, the largest ever by a domestic institution, KEXIM also issued Kangaroo bonds worth $500 million in March.

The reason policy banks are consecutively issuing global bonds like this is interpreted as a proactive measure to secure liquidity in advance amid expectations of continued rising interest rates. The global trend of interest rate hikes continues, with the U.S. taking big steps (raising the benchmark interest rate by 0.5 percentage points at once). The U.S. Federal Reserve (Fed) raised interest rates by 0.5 percentage points, the largest increase in 22 years, at the Federal Open Market Committee (FOMC) regular meeting earlier this month and indicated plans to raise the benchmark rate by 0.5 percentage points several more times. The European Central Bank (ECB) is also expected to raise interest rates in the third quarter, moving away from negative interest rates.

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