Bond issuance exceeded redemptions in two months. Corporate bond yields are stabilizing and the primary market is returning to normal after overcoming the Legoland shock.
During the first 10 days of this month, the amount of non-ABS corporate bonds issued was 1.3458 trillion won and the redemption amount was 1.087 trillion won.
The corporate bond market is on thin ice after the Legoland debacle in late September. The net issuance amounted to 656.8 billion won in September, but redemptions exceeded the issuance amount in October and November, and companies had to raise funds in other ways due to the failure of the corporate bond market.
Authorities and the sector have launched liquidity support measures, such as the Bond Market Stabilization Fund, to deal with the crisis, which have helped stabilize money markets. Yields on his unguaranteed 3-year AA- bonds fell from 5.736% to 5.391% from October to December 9. Commercial paper yields are also expected to stop rising and market demand is expected to recover.
From Oct. 21 to Dec. 9, the unguaranteed 3-year BBB-bond yield fell from 11.591% to 11.236%. Interest rates, which have continued to rise since Sept. 21, remain unchanged from 5.54% this month.
One of the variables is that credit spreads are around 170 basis points. Government bond yields fell faster than corporate bond yields, with 3-year AA corporate and 3-year Treasury credit spreads widening to 173 basis points on Dec. 9. All eyes are on the FOMC meeting scheduled for this week.
