Citi Sees Another Busy Year for Korea Bond Sales
Citi Sees Another Busy Year for Korea Bond Sales
(Bloomberg) --
South Korea’s biggest arranger of offshore bond sales expects another busy year in 2020 due to a big wall of maturing debt and foreign investor demand at a time of rising uncertainties elsewhere.
Korean issuers sold $33.3 billion of notes abroad last year, only slightly below the six-year high marked in 2018, Bloomberg-compiled data show. Issuance in 2020 will likely reach similar levels, said June Won, managing director of Citigroup Global Markets Korea Securities Ltd. More than $25 billion of Korean offshore notes fall due in 2020, the most in three years.
While Asia’s fourth-largest economy probably grew at the slowest pace in a decade last year, investors like that the nation is one of only a few in Asia with double-A credit scores. Despite concerns about North Korea, South Korean notes are seen as safe-haven assets by some at a time when the coming U.S. elections, rising defaults in China and geopolitical tensions in the Middle East make many investors reluctant to take too much risk.
See a chart on record bond sales across Asia
“There’s demand from investors for Korean bonds due to their safety and a flight to quality,” said Won in an interview. “Issuers may also want to lock in low borrowing costs by getting funding preemptively before volatility increases.”
- Credit-default swaps insuring South Korea’s sovereign debt against non-payment have decreased about 15bps in the past year, CMA data show. The contracts last month reached their lowest level since July 2007.
- From the perspective of bond investors, the Korean government’s recent measures to tighten household loans to cool home prices will help relieve the nation’s long-standing household debt concerns, he said.
- After a record 13.1 trillion won ($11.3 billion) of environmental, social and governance bonds were sold in 2019, demand for ESG debt will likely remain strong this year, Won said.
- Among the $33.3 billion of Korean offshore bonds sold last year, Citigroup arranged $3.9 billion of deals, followed by HSBC Holdings Plc with $3.8 billion and BNP Paribas SA with $3.2 billion, according to Bloomberg-compiled data. The biggest issuer was Korea Development Bank, selling $5.6 billion.
To contact the reporter on this story: Kyungji Cho in Seoul at kcho54@bloomberg.net
To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Ken McCallum, Beth Thomas
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