[Dividend Investing in an Era of Uncertainty②] "Cash Accumulating Every Month"... Monthly Coupon Bonds Sell Out Quickly

Cash Deposited Punctually Every Month
Wolipyo Bonds Sold Out on Release Day
Brokerages Buying Bonds for Retail Sales One After Another
"Bond Investment Still Attractive, Volatility Unlikely to Be Extreme"

Editor's NoteAs the global financial market environment deteriorates and uncertainty over capital returns increases, demand from investors seeking stable income has grown, bringing dividend investing into the spotlight. With the rise of dividend exchange-traded products (ETPs), investment opportunities are expanding, and the market size is expected to continue growing. Increased interest from general investors in shareholder returns is also driving companies to expand their dividend payouts, further fueling market growth.

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[Asia Economy Reporter Minji Lee] In the bond market, a ‘monthly coupon bond’ product that pays dividends regularly every month is attracting attention. A coupon bond refers to a bond that pays interest at a fixed rate until maturity. Monthly coupon bonds shorten the interest payment period from the usual quarterly cycle to a monthly one.

These bonds are especially popular among investment nomads who have not found suitable investment destinations and investors aged 60 and above who require steady cash flow. The appeal lies in the ability to enjoy monthly interest payments of around 4-5% amid increased volatility in the financial markets.

According to KB Securities on the 1st, starting from the 5th, they are selling 20 billion KRW worth of 2-year monthly interest payment bonds issued by Hana Bank (AAA rating). The interest rate is about 4% annually, and interest is paid monthly. For example, if an investor purchases 100 million KRW worth of these bonds, they can receive approximately 300,000 KRW in after-tax interest every month for a year starting next month. A KB Securities representative said, “This is the first time we are introducing monthly payment bank bonds to our customers,” adding, “Purchases are not possible through the Mobile Trading System (MTS) and require visiting a branch in person.”

As monthly interest payment bonds have garnered strong interest from individual investors, major securities firms such as KB Securities, Korea Investment & Securities, Mirae Asset Securities, and Shinhan Investment Corp. have quickly introduced bond products following Samsung Securities’ debut last month. Small and mid-sized securities firms, including Yuanta Securities, also plan to consecutively launch monthly coupon bond products early this month. Previously, Samsung Securities sold a 1-year maturity Hyundai Card 852 bond (AA rating) last month with a pre-tax interest rate in the 4% range, which sold out quickly, and some customers reportedly requested additional subscriptions. On the 25th of last month, Hanwha Investment & Securities sold 5 billion KRW worth of DGB Capital 966-2 bonds (A+ rating), which sold out on the same day. Due to high customer interest, the investment amount was limited to 50 million KRW.

The combination of tightening policies by major countries and concerns over economic recession has increased demand for stable investment options, fueling the popularity of these bonds. Particularly, investors in their 60s who require steady cash income have been quick to act. More than half of the customers who purchased monthly payment corporate bonds sold by Samsung Securities last month were aged 60 or older. The appeal lies in the higher investment attractiveness compared to fixed deposits. Monthly coupon bonds with maturities of 1 to 2 years offer short investment periods and allow investors to enjoy interest rates of 4-6% on bonds issued by card companies and financial firms. In some cases, the entire supply sells out within 10 minutes of launch. Furthermore, buying bonds cheaply during times like now and selling them at higher prices during rate cuts can yield capital gains without tax, in addition to interest income. A representative from a small to mid-sized securities firm said, “Special deposit products at banks have amount limits and additional conditions, so some investors are turning to securities firms,” adding, “Inquiries about monthly coupon bonds are increasing among first-time bond investors and investors in their 20s and 30s.”

Although uncertainty in the bond market is rising, market insiders say it is still a good time to invest in bonds. Federal Reserve Chairman Jerome Powell has indicated a willingness to continue raising interest rates, suggesting room for further increases, but large volatility is not expected. Kim Ki-myung, a researcher at Korea Investment & Securities, analyzed, “Although uncertainty is increasing due to recent domestic monetary policy uncertainty and the Fed’s hawkish stance being largely priced in, uncertainty will be resolved after the September Federal Open Market Committee (FOMC) meeting,” adding, “Following government bonds, the credit market will sequentially show interest rate stability.”