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

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NO. 450 Nov. 21 2011 Rate changes in bond indices KTB & MSB Market Overview Bank Bonds and Other Fin.

1 NO. 450 Nov 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 pages 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. Sohyoung Park ( )

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.450. Nov

3 KTB & MSB Market Overview KTB & MSB Local bond market, which got off to a weak start, turned strong as worries over european financial crisis reignited. The market was coupled with local stock market through the week. 3yr/5yr KTB spread somewhat tightened. However, with long-term bonds which matures in over 10yrs bearish, 5yr/10yr spread expanded by 4bps. The spread between 1yr and 2yr MSB spread remained unchanged 15 5bps from the previous week. 3yr/5yr KTB spread tightened by 1bp to 14bps. However, 5yr/10yr one expanded by 4bps. The spread between 2yr MSB and 5yr KTB closed the week at 1bp. [Table1] Change in yield by bond type Matrity 11/04 11/11 11/18 Weekly Change(bps) MSB 1yr MSB 2yr KTB 3r KTB 5y KTB 10r (unit: %) [Fig.1] Change in KTB Yield No.450. Nov

4 [Fig.2] Change in MSB Yield [Fig.3] KTB Spread [Fig.4] BEI No.450. Nov

5 Bank Bonds and Other Financial Debentures Bank Bonds & Others I) Bank Bonds While yields on the AAA-rated bank bonds remained mixed in their terms, short-term bonds which led the primary market experienced the bull market. New issuance of bank bonds was decreased but actively traded in the secondary market. 1yr, 2yr, and 3yr spread tightened by 4bps, 3bps, and 4bps. New issuance of bank bonds, which experienced the bull market to KTB and MSB, totaled 1.37 trillion won, 1.27 trillon won decrease from the previous week. Maturity 11/04 11/11 11/18 Weekly change(bps) 1yr 14bp 13bp 9bp -4 2yr 23bp 21bp 18bp -2 3yr 46bp 47bp 43bp -4 (AAA-rated bank bonds) II) Other Financial Debentures Spreads in financial debentures tightened overall. With new issuance decrease, they drew enough investors to lead the strong market. They were traded strongly in the secondary market also. The AA+-rated 1yr, 2yr, and 3yr spread tightened by 7bps, 6bps, and 6bps. New issuance of other financial debentures amounted to billion won with billion won decrease from the prevous week. Maturity 11/04 11/11 11/18 Weekly change(bps) 1yr 59bp 53bp 46bp -7 2yr 71bp 66bp 60bp -6 3yr 98bp 95bp 89bp -6 ( AA0-rated other financial debentures) No.450. Nov

6 [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.450. Nov

7 Corporate Bond Market Overview Corporate Bond Yields The bond market moved in relation to the equity market. The bond market initially started week as equity was strong and moved in opposite direction to stocks. Towards the end of the week, demand for safe assets increased as European issues re-emerged but the bond market closed slightly stronger compared with the previous week due to uneasiness against low rates. Credit Spread - narrowed The credit market strengthened and credit spreads narrowed. Credit spreads of short-term debt with less than 2 years remaining narrowed most but movedments differed by individual company. Primary & Secondary Market New bonds were issued by GS Caltex (AA+), Hanjin Heavy Industries (A), Daewoo International (AA-), BS Financial Group (AAA), Samsung Mobile Display (AA), Hanwha (A), Korea West Power (AAA), Polaris Shipping (BBB-) and Halim (A-). Next week, there will be issuance by Dongwon Systems (BBB), Hansol Paper (A-), CJ (AA-), CJ Cheiljedang (AA), Lotte Chilsung (AA+), Kia Motors (AA), LS Cable (A+), DongA Ilbo (BBB+), CJ CGV (A+), TongYang Securities (A), Doosan E&C (A-) and Shinhan Financial Group (AAA). Trade volume reduced The total trade volume in the secondary market fell compared with the previous week but was still active. Trade was frequent for 3 years or less and some long term debt, 10 years or more, issued by Korea Hydro Nuclear Power. No.450. Nov

8 Swap Market Overview Major Yields Trend and Weekly Changes Major Interest Rates 7. 30% 6. 30% 5. 30% 4. 30% 3. 30% 2. 30% 1. 30% 0. 30% % USDI RS 3Y KRW CRS 3Y KRWI RS 3Y KTB 3Y KRW CRS Curves 3. 00% 2. 50% 2. 00% 1. 50% 1. 00% 0. 50% Weekly Changes 0. 20% % % KRW IRS Curves 5. 00% 4. 50% 4. 00% 3. 50% 3. 00% 2. 50% 2. 00% 1. 50% 1. 00% 0. 50% % 0. 03% 0. 10% KTB KRW I RS KRW CRS USD I RS USD TB IRS Spread Trends and Weekly Changes IRS Spread Trend 0. 30% 0. 20% 0. 10% % % % KRWI RS 5Y- 3Y KRWI RS 10Y- 5Y Weekly Changes 0. 04% 0. 04% 0. 03% 0. 03% 0. 02% 0. 02% 0. 01% 0. 01% KRWI RS 5Y- 3Y KRWI RS 10Y- 5Y 0. 01% 0. 04% % No.450. Nov

9 Swap Basis Trend and Weekly Changes Swap Basis Trend Weekly Changes 0. 20% 0. 50% % % % % % % SWAP BASI S( 1Y) SWAP BASI S( 3Y) SWAP BASI S( 1Y) SWAP BASI S( 3Y) 0. 08% 0. 10% % Bond/IRS Trend 0. 80% 0. 30% SWAP SPREAD( 1Y) SWAP SPREAD( 3Y) Weekly Changes % % % % % SWAP SPREAD( 1Y) SWAP SPREAD( 3Y) % Major Yields & Spreads Rates Weekly Change Yearly Change US TREASURY Y US IRS 3Y KRW CRS 3Y KRW IRS 3Y KTB3Y IRS 5Y-3Y SWAP BASIS3Y SWAP PREAD 3Y (unit: %) 전년말대비 No.450. Nov

10 ELS Market Overview Stock Market Due to the European risk, a high degree of intraday volatility was seen in the stock market. The market rose 2.11% to 1, on Monday but fell 0.88% and 1.59% on Tuesday and Wednesday. The market rose 1.11 on Thursday but as the fear grew the contagion would spread to France and US financial institutions, the KOSPI fell 2.00% to 1, on Friday. Pension funds defended market fall by buying shares and individual investors also increased their buying. <Figure 1> KOSPI200, HSCEI Index Trend for the Past Year ELS Primary Market The total number of new issues increased 30 from the previous week to 225, out of which 122 were public and 103 private. The total amounts for new public and private issues each increased billion won to billion won and billion won to billion won. The number of new public and private issues increased 16 and 14 respectively. Weekly Issuance Type Out of the 195 new issues this week, 116 (59.49%) were of step down type, 50 of option, and 29 of miscellaneous type. No.450. Nov

Bank Bonds and Other Fin. Debentures

NO. 442 Sept. 26 2011 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 pages 1 2 5 7 8