Corporate bond issuance volume plummeted 19.9% last month... CP and short-term bonds increased

[Asia Economy Reporter Lee Jung-yoon] Despite an increase in asset-backed securities (ABS) last month, the issuance volume of corporate bonds sharply declined by nearly 20% due to decreases in general corporate bonds and financial bonds. Meanwhile, commercial paper (CP) and short-term bond issuance performance increased compared to the previous month.

According to the corporate direct financing performance for September announced by the Financial Supervisory Service on the 27th, the issuance volume of corporate bonds was 16.448 trillion KRW, down 4.055 trillion KRW (19.8%) from the previous month.

General corporate bonds amounted to 11 cases totaling 1.14 trillion KRW, a decrease of 195.5 billion KRW (14.6%). As the amount of matured bonds increased by 27.5% compared to the previous month, refinancing issuance rose by 138.3%. Operating and facility funds sharply declined by 57.3% and 94.4%, respectively. Since no AAA-rated corporate bonds were issued, the proportion of high-quality bonds fell from 88.0% to 54.4%, and all were issued as medium-term bonds with maturities exceeding one year but not exceeding five years.

Financial bonds totaled 160 cases amounting to 13.2405 trillion KRW, down 4.5725 trillion KRW (25.7%) from the previous month. In contrast, asset-backed securities (ABS) reached 99 cases totaling 2.0675 trillion KRW, an increase of 713 billion KRW (52.6%). P-CBOs, which are ABS issued with credit enhancement by institutions such as the Credit Guarantee Fund to facilitate funding for small and medium-sized enterprises, amounted to 13 cases totaling 737.5 billion KRW, up 129.5 billion KRW.

The total corporate bond balance at the end of September was 643.2145 trillion KRW, an increase of 93.03 billion KRW (0.1%) from the previous month. However, since the issuance amount of general corporate bonds did not reach the September redemption amount of 2.1 trillion KRW, net repayments continued.

Additionally, the issuance performance of commercial paper (CP) and short-term bonds was 123.8686 trillion KRW, up 6.2266 trillion KRW (5.3%) from the previous month.

As of last month, CP issuance totaled 42.8625 trillion KRW, an increase of 6.413 trillion KRW (17.6%) compared to the previous month. General CP was 16.4189 trillion KRW, down 24.8% from the previous month, while other asset-backed commercial paper (ABCP) was 23.0045 trillion KRW and real estate project financing (PF)-ABCP was 3.4391 trillion KRW, increasing 94.8% and 22.2%, respectively, from the previous month.

The CP balance at the end of September was 238.5104 trillion KRW, down 47.65 billion KRW (0.2%).

Furthermore, stock issuance last month amounted to 763.1 billion KRW (16 cases), up 390.8 billion KRW (105%) from the previous month (12 cases). Initial public offerings (IPOs) were 13 cases totaling 583.8 billion KRW, a sharp increase of 8 cases and 402.6 billion KRW (222.2%) compared to the previous month. Conversely, paid-in capital increases were 3 cases totaling 179.3 billion KRW, down 4 cases and 11.8 billion KRW (6.2%).

Meanwhile, on the 28th of last month, Governor Kim Jin-tae of Gangwon Province announced a court rehabilitation application for Gangwon Jungdo Development Corporation (GJC), which was involved in the Legoland theme park foundation project, causing significant turmoil in the bond market. Governor Kim stated at the time, "We decided to apply for rehabilitation of the Jungdo Development Corporation to escape the 205 billion KRW guarantee burden," adding, "If the court-appointed manager sells the corporation's assets properly at fair value, the loans can be repaid."

However, although Governor Kim pledged to allocate a budget to repay the 205 billion KRW debt guarantee payment by January 29 of next year, concerns spread that the local government's credit guarantee could not be trusted, causing the funding market to freeze rapidly.

In response, the government has begun efforts to stabilize the situation, including deciding to implement a liquidity supply program worth 50 trillion KRW at the emergency macroeconomic and financial meeting chaired by Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho on the 23rd.

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