Korean corporate bond issuance hits 2022 monthly low in September

South Korean corporate bond issuance in September hit a monthly low this year on souring investor sentiment due to interest rate hikes.

Corporate bonds issued last month, excluding asset-backed securities (ABS), amounted to 5.344 trillion won ($3.783 billion), according to the Korea Financial Investment Association (KOFIA) on Thursday.

It nosedived 39.1% from 8.771 trillion won in January 2022 and 37.1% from 8.495 trillion won in September of last year.  

Corporate bond issuance has declined as more institutional investors prefer safe assets over lower-rated bonds, market watchers said.    

The increasing credit spread between treasury bonds and corporate bonds has worsened Korean companies’ fundraising.

As of Oct. 6, the credit spread between 3-year, AA- non-guaranteed corporate bonds and 3-year treasury bonds reached 108.65 basis points.

Some corporate bond yields hit the highest point of this year on Sept. 26. The 3-year, AA- non-guaranteed corporate bond yield reached 5.528%; the 3-year, BBB- non-guaranteed corporate bond yield amounted to 11.382% on the day.

Both yields soared more than 300 basis points from the former’s 2.460% and the latter’s 8.316% on January 3, when the yields hit the lowest point of this year.   

By comparison, the issuance of bank bonds has significantly increased as companies flock to banks for loans, reducing fundraising via corporate bonds.

The net issuance of bank bonds reached 7.460 trillion won in September, hitting the second-highest monthly issuance of this year, following 7.988 trillion won in July.

Write to Hyun-Ju Jang at blacksea@hankyung.com
Jihyun Kim edited this article.