March Corporate Bond Issuance Drops by 7 Trillion Won from Previous Month... "Due to Worsening Credit Squeeze"

[Asia Economy Reporter Oh Ju-yeon] As the financial market became unstable due to the novel coronavirus infection (COVID-19), credit crunch intensified, resulting in a significant decrease in corporate bond issuance last month compared to the previous month.

According to the 'March 2020 Over-the-Counter Bond Market Trends' announced by the Korea Financial Investment Association on the 8th, the 3-year government bond yield last month fell by 3.4 basis points to 1.070%, while the 10-year yield rose by 21.8 basis points to 1.551%, showing a steepening.

Due to concerns over the spread of COVID-19, interest rate volatility expanded, but after mid-month, global policy rate cuts and bond market stabilization measures led to a 'low short-term, high long-term yield curve' phenomenon.

Last month, bond issuance increased by 7.3 trillion KRW compared to the previous month to 78.995 trillion KRW, driven by increased issuance of financial bonds, government bonds, and asset-backed securities (ABS).

However, corporate bond issuance amounted to 5.055 trillion KRW, decreasing by 7.283 trillion KRW from the previous month (12.338 trillion KRW).

The Korea Financial Investment Association evaluated, "Due to financial market instability, concerns over credit crunch grew, and as credit spreads widened sharply, the corporate bond issuance market contracted."

By credit rating, issuance of AA-rated bonds was 1.612 trillion KRW, down 80% (6.589 trillion KRW) from the previous month (8.201 trillion KRW).

Issuance of AAA and BBB-rated bonds also decreased by 551 billion KRW and 140 billion KRW respectively, recording a change rate of -80% and -52% respectively.

Meanwhile, bond trading volume increased sharply compared to the previous month due to increased interest rate volatility, rising by 135.7 trillion KRW to 600.8 trillion KRW. The average daily trading volume was about 27.3 trillion KRW.