Bond market sentiment improves as AA- firms attract investors

[Photo by Yonhap]

Investor sentiment is improving in the Korean bond market as more companies with AA- ratings are successfully raising funds.

According to sources, CJ ENM Co., which has a credit rating of AA-, attracted 760 billion won ($608.7 million) in funds in book building for new bond issuance on Tuesday, which surpassed its expected amount of 170 billion won. CJ ENM plans to sell bonds worth a total 170 billion won, including 60 billion won bonds with a maturity of 2 years and 110 billion won with a maturity of 3 years.

For Hyundai Steel Co., another AA firm that launched book building on the same day, a total of 1.8 trillion won flowed in. Hyundai Steel said it will issue 200 billion won bonds, including 50 billion won bonds with a maturity of 2 years and 20 billion won bonds with a maturity of 5 years.

In the local bond market, companies with high credit ratings have been raising funds since the beginning of this year. Book building was conducted for corporate bonds rated AA or higher, including KT Corp. and EMART Inc. on Jan. 4, and POSCO Holdings Inc. and UAMCO on Jan. 5 and LG Uplus Corp. on Jan. 6. This week’s book building will be conducted for Lotte Confectionery Co., Daesang Corp., Korea Investment Holdings Co., GS Energy Corp. and SK geo centric Co.

The local primary market is expected to remain strong until credit spreads recover at least to levels seen before the default of Legoland Korea, said Kim Eun-ki, senior analyst at Samsung Securities.

Meanwhile, the certificate of deposit (CD) rate based on 91-day bonds issued by AAA-level commercial banks, a reference rate in loan and derivatives markets, was down by 2 basis points from the previous day to close at 3.90 percent Tuesday.