Corporate bond issues, trading dip amid coronavirus

(Yonhap)

Corporate bond issuance and transactions in South Korea fell last week as investors remained spooked by the spread of the new coronavirus, data showed Monday.

South Korean companies floated bonds worth 1.1 trillion won ($900 million) during the one-week period between March 6 and Thursday, compared with 1.5 trillion won a week earlier, according to the data from bond rater NICE Pricing & Information.

Trading volume of corporate bonds also decreased by 216.7 billion won to 2.74 trillion won over the cited period.

"Corporate bond issues dropped amid strong expectations the Bank of Korea will slash its main interest rate due to the global pandemic of COVID-19," the bond rating agency said. "Trading volume also took a hit from weaker investor sentiment."

Market watchers said bond yields, which move inversely to prices, have been on a sharp rise as investors rush to sell holdings amid greater market uncertainty.

The yield on three-year unsecured corporate bonds with a credit rating of AA- closed at 1.810 percent Friday, up 10.3 basis points from the prior session, according to the Korea Financial Investment Association.

The return on debentures with a rating of BBB- came to 7.965 percent, up 11 basis points from a day earlier. In particular, the spread between BBB- corporate bonds and the yield on three-year government bonds soared to a year high of 6.892 percentage points Friday, pointing to investors' greater risk aversion.

The association said South Korean companies are having difficulties raising funds through debt sales as the coronavirus outbreak has drastically increased market uncertainty.