Corporate Bond and CP Interest Rates Rising... Tongyeong Ecopower Corporate Bonds Entirely Unsold

Corporate bonds with low credit ratings still unpopular
Daegu Transportation Corporation secures only 10 billion KRW
Tongyeong Ecopower's entire issue unsold despite 7% interest rate

On the 28th, amid growing concerns over the spread of COVID-19, commuters near Yeouido Station in Seoul hurriedly walked wearing masks on their way to work. Photo by Mun Honam munonam@

[Asia Economy Reporter Han Jinju] As signs of a freeze in the capital market emerge, interest rates on corporate bonds and CP continue to rise.

On the 27th, in the Seoul bond market, the interest rate on AA- rated unsecured corporate bonds with a 3-year maturity closed at 5.620%, up 6.7bp (1bp=0.01 percentage point) from the previous day. The interest rate on BBB- rated unsecured corporate bonds with a 3-year maturity also rose 6.2bp to 11.466%.

The 91-day corporate paper (CP) interest rate rose 4bp to 4.55%, reaching a yearly high. The interest rates on 3-year Korea Electric Power Corporation bonds and 1-year Korea Development Bank bonds rose to 5.701% and 4.725%, respectively.

On this day, high-grade public bonds were absorbed in the market, but corporate bonds with low credit ratings were still shunned.

AAA-rated Korea Gas Corporation and Korea Railroad Corporation successfully issued bonds by meeting their target subscription amounts in the bidding.

However, Daegu Transportation Corporation (AA+), which sought to raise 29 billion KRW with 3-year bonds, secured only 10 billion KRW worth of bonds.

On the same day, Tongyeong Eco Power (A+), which conducted a demand forecast for 51 billion KRW in 3-year bonds, had all its corporate bonds unsold. Despite offering an interest rate close to 7% per annum, it failed to receive underwriting orders. This was due to its low credit rating of A+ and a shortage of institutions with sufficient funds.

Recently, companies have repeatedly faced setbacks in corporate bond demand forecasts, but preparations for corporate bond issuance continue.

On the 28th, Kyobo Securities (AA-) will conduct a demand forecast for a total of 150 billion KRW in corporate bonds. The issuance consists of 120 billion KRW in 1-year bonds and 30 billion KRW in 1.5-year bonds, with the possibility of increasing up to 300 billion KRW depending on demand.

Korea Electric Power Corporation will proceed with additional corporate bond issuance on the 28th. The previous day, KEPCO planned to issue 20 billion KRW each in 2-year and 3-year maturity bonds but failed to fill the amount.

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