Demand grows for blue chip bonds from public companies amid recovery signs

[Photo by MK DB]

The bonds of South Korea’s top-rated public and some private companies are showing some signs of recovery from a pummeling as their new fixed-rate debts are sold at lower yields or at a larger size than originally planned.

Korea Gas Corp. sold its new AAA-rated bonds Thursday at yields lower than the market average rate evaluated by private bond rating agencies. For its 2-year bonds, 120 billion won was raised at a yield 26 basis points lower than the market average of 4.966 percent. For 3-year bonds, 100 million won was closed.

The issuance of top-rated public sector bonds at lower borrowing costs than the market average has continued since late last month. Bonds from big names like Korea Asset Management Corp., Korea Electric Power Corp., and Korean Expressway Corp. all successfully sold at interest rates lower than the market average.

In addition, the amount of bond issuance is higher than expected as demand for high-rated corporate bonds with a credit rating of AA or higher is increasing. Hi Investment & Securities decided to increase its new bond issuance size to 300 billion won after book building on Nov. 29, 180 billion won more than the original plan. SK Inc., which has an AA+ rating, is another company whose new bond sale increased to 290 billion won from 230 billion won.

Still, market watchers say that it remains to be seen whether this favorable market atmosphere will spread to other debt with A rating, asset-backed bonds for real estate project financing and commercial papers.