Sharp drop in corporate bond issuance,5KRW7Confirmed net redemptions of one trillion won in the first half
General corporate bond issuance in the first half came to46KRW3one trillion won, and excluding maturities,5KRW7one trillion won was net redeemed. Large companies are shifting their funding from corporate bonds to commercial paper and bank loans.
General corporate bond issuance in the first half was46KRW3one trillion won, and excluding maturities,5KRW7one trillion won was net redeemed. This is confirming a change in corporate funding methods.
Researcher Lee Kyung-rok of Shin Young Securities said in a report on the first day that the domestic financial market in the first half showed a stark contrast between shrinking corporate bond issuance and expanding bank lending to large companies.11. Reasearch
The report said the corporate bond market in the first half showed a net redemption trend as issuance fell sharply in an unusual move. Last year, general corporate bond issuance in the first half was56KRW3one trillion won.
Net redemption is the phenomenon in which the bond balance decreases because maturing repayments exceed new issuance. The report said this trend means a contraction in liquidity in the corporate bond market.
The report said large companies are switching their financing from corporate bonds to commercial paper, or CP, and bank loans. CP is a short-term borrowing instrument with a short maturity.
The report pointed to inverted interest rates and rising market rates as the backdrop. It explained that this interest-rate environment dampened issuance intentions.
The report added that, as corporate bond issuance shrinks and bank lending expands at the same time, companies need to review their short-term funding management structure.
Sources: 연합인포맥스
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