Fewer Than September 2020 When COVID-19 Occurred
[Asia Economy Reporter Hwang Yoon-joo] As global tightening intensifies and concerns over an economic recession rise, domestic companies are also facing difficulties in raising funds.
Following the U.S. Federal Reserve's (Fed) giant step (a 0.75 percentage point increase in the benchmark interest rate at once), major central banks around the world have joined the rate hike trend, and with the Bank of Korea expected to decide on a 0.50 percentage point increase next month, the corporate bond market is freezing up.
According to the Korea Financial Investment Association on the 25th, the amount of corporate bonds issued excluding asset-backed securities (ABS) from the 1st to the 23rd of this month was 2.8214 trillion won.
This is a 61.84% decrease compared to the corporate bond issuance amount of 7.3546 trillion won during the same period last year. It is less than half compared to the same period in 2020 (5.9579 trillion won), when the corporate bond market was tightened due to the impact of COVID-19.
The corporate bond issuance amount, which recorded 8.7709 trillion won in January this year, decreased to 7.8692 trillion won in June, 6.4002 trillion won in July, and fell further to 5.3975 trillion won last month.
On the other hand, the net issuance amount, which is the issuance amount minus the redemption amount, steadily decreased from 3.3137 trillion won in January to about 629.1 billion won last month. In particular, net redemption amounts of 611.1 billion won and 1.0132 trillion won were recorded in May and July, respectively.
This month, until the 23rd, the redemption amount exceeds the issuance amount by 306.2 billion won, showing a net redemption status.
The fact that the corporate bond maturity redemption amount is greater than the newly issued amount means that companies focused more on repaying existing debt rather than raising new funds for investment.
This is due to inflation concerns not subsiding, such as the U.S. August Consumer Price Index (CPI) exceeding expectations, and the Fed and other global central banks strengthening their tightening measures, which has dampened investment sentiment.
Corporate bond yields are also soaring. Since bond yields and prices move inversely, a rise in yields means prices have fallen accordingly. On the 23rd, the 3-year unsecured corporate bond yield for companies with a credit rating of AA- reached a new annual high of 5.189%. Compared to the same day a year ago (1.996%), this is nearly a 2.6-fold increase.
On the same day, the 3-year unsecured corporate bond yield for companies rated BBB- also set a new annual high at 11.043%. This is also a significant increase compared to the same day a year ago (8.218%).
The AA- rated yield is the highest since March 10, 2010 (5.20%), and the BBB- rated yield is the highest since March 15, 2010 (11.12%).
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