NO pages. July Rate changes in bond indices. KTB & MSB Market Overview. Bank Bonds and Other Fin. Debentures

Transcription

1 NO. 537 pages July Rate changes in bond indices KTB & MSB Market Overview Bank Bonds and Other Fin. Debentures Corporate Bond Market Overview Swap Market Overview ELS Market Overview This document is for our clients only. Other than disclosures relating to KIS Pricing, it is based on credible information, but we do not represent it is accurate or complete, and it should not be relied on as such. Therefore, we are not liable to any investment activities that are based on this document. More information is available at bond.co.kr and our investment portfolio management tool, KIS-Net.

2 Rate Changes in Bond Indices Spot Curve by bond type Swap Spread between KTB Hankyung-KIS-Reuters, KOBI30, KOBI120 (Call reinvest index) Market value weighted average YTM by type Bond Index Duration No.537. JULY 22,

3 KTB & MSB Market Overview KTB & MSB KTBs started the week with bearish movements on France s credit rating cut and China s weak growth data. The KTB market was in a cautious mood ahead of Bernanke s testimony in Congress. After Bernanke said the Fed will keep its key interest rate low and that the path of quantitative easing is not on a preset course, KTBs reversed early losses. On the last day of the week, KTBs were mixed. Although foreign investors were bullish on KTB futures, KTBs wiped out gains as profittaking weighed on KTBs. The 3/5yr spread widened by three basis points to 26bps while the 5/10yr spread expanded by four basis points to 32bps. Yields on 2yr MSB and 3yr KTB fell by a basis pont and two basis points, respectively. Last week, KTBs were mixed on Bernake s testimony in Congress and global weak economic data. [Table1] Change in yield by bond type (unit: %) Maturity 7/5 7/12 7/19 Weekly Change(bps) MSB 1yr MSB 2yr KTB 3yr KTB 5yr KTB 10yr No.537. JULY 22,

4 [Fig.1] Change in KTB Yield [Fig.2] Change in MSB Yield No.537. JULY 22,

5 [Fig.3] KTB Spread [Fig.4] BEI No.537. JULY 22,

6 Bank Bonds and Other Financial Debentures Bank Bonds & Others Bank Bonds The bond market this week maintained its range from last week, and it showed bullish movement in the second half of week due to Bernake speech. However, the market closed at slightly higher than last week without any significant momentum. 20-year bid expected to dominate market sentiment in the next week. The bank bond market this week, mostly movement went along with benchmartk, however relatively bullish movement in short-term period. As a result, the credit spread, the significant differences appeared between long-term and short-term segments. The creidit spreads issuances have recovered to the original level as it exceeded 1 trillion won. AAA credit spreads were tightened by 2bps for all maturity of 1-yr to 3-yr. The bank bonds have issued 1trillion 550 million won in total which is increased by 1trillion and 200 million won from previous week Maturity 7/5 7/12 7/19 Weekly change(bps) 1yr 10bp 7bp 5bp -2 2yr 18bp 17bp 15bp -2 3yr 29bp 30bp 28bp -2 Other Financial Debentures (AAA-rated bank bonds) The other financial debentrues mostly movement along with benchmark, and it showed bullish movement in short-term segment. The total issuances have decreased compared to last week, and AA+ issuance was sustained and steady. The issuance rate was mostly issued at reference level or under 1 level except A-ju Capital which have issued relatively strong. The transanctions have decreased due to large fluctuations in secondary market. The credit spread of AA+ other financial debentures in this week tightened by 1bp for both 1-yr and 2- yr, and bonds with maturity of 3-yr remained unchanged from last week. The total amount of issuances for the other financial debentures is 495 million won which is decreased by 160 million won from previous week. Maturity 7/5 7/12 7/19 Weekly change(bps) 1yr 26bp 24bp 23bp -1 2yr 32bp 33bp 32bp -1 3yr 40bp 44bp 44bp 0 ( AA+-rated other financial debentures) No.537. JULY 22,

7 [Fig 1] Change in Bank Bond AAA Yield [Fig 2] Change in Bank Bond AAA Credit Spread [Fig 3] Change in Credit Spread of Other Financial Debentures No.537. JULY 22,

8 Corporate Bond Market Overview Corporate Bond Yields Corporate bond market showed recovery in the trade volumes as investors confirmed that the Fed s QE tapering is not on Preset Course and as US economic indicators showed favorable numbers. Corporate bonds with short maturity of less than 2 years and bonds with credit rating of A showed increased trade volume. Demand for blue-chip companies with relatively higher growth potential are expected to increase when money market rates volatility subsides in the foreseeable future. Primary Market The total amount issued, matured and outstanding for this week were trillion, trillion and trillion KRW respectively. The amount outstanding increased by 11.19% compared to last year. New bonds were issued by Hyundai BNG Steel (A-), AJ Rental Car (A-) and Shinhan Financial Group (AAA). New issuances by Doosan Construction (BBB+), Moorim Paper (A-) and Woori Financial Group (AAA) are planned for next week. Secondary Market Our evaluation on the spread between 3 year KTB and 3 year corporate bonds (AAA rated, A- rated) is 36bp and 89bp respectively. Last week s credit spread did not show much change except for the bonds with short maturity of 2 years or less which shrank slightly. As economic indicators begin to show signs of stabilization, credit spread is expected to shrink further in blue-chip companies with relatively higher growth potential. No.537. JULY 22,

9 Swap Market Overview Major Yields Trend and Weekly Changes Major Interest Rates Weekly Changes KRW CRS Curves KRW IRS Curves IRS Spread Trends and Weekly Changes IRS Spread Trend Weekly Changes No.537. JULY 22,

10 Swap Basis Trend and Weekly Changes Swap Basis Trend Weekly Changes Bond/IRS Trend Weekly Changes Major Yields & Spreads Rates US TREASURY 3Y US IRS 3Y KRW CRS 3Y KRW IRS 3Y KTB Weekly Change Yearly Change Y IRS 5Y-3Y SWAP BASIS 3Y SWAP SPREAD 3Y (unit: %) No.537. JULY 22,

11 ELS Market Overview Stock Market This week the KOSPI started high as Chinese economic data bestowed positive signs toward market sentiment. NYSE looked up with chairman of Federal Reserve s statements on its back, rising for 2 days in a row, nonetheless warm breeze from US hardly reached the Koeran peninsula. Foreign investors bearish, the KOSPI retreated to One/Dollar exchange rate closed at Won. <Figure 1> KOSPI200, HSCEI Index Trend for the Past Year ELS Primary Market Weekly Issuance Type The total number of new issues increased 30 from the previous week to 320, out of which 166 were public and 154 private. Out of the 320 new issues this week, 249 (77.81%) were of step down type, 54 (16.88%) of option, and 17 of miscellaneous type. No.537. JULY 22,