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

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1 NO. 502 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.

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.502. Nov 19,

3 KTB & MSB Market Overview KTB & MSB Yields on KTB were boxed in a narrow range within 1bp. Concerns over fiscal cliff in the U.S and worries on domestic economic downturn were offset by caution to low KTB yields. However, as KOSPI slipped last Friday, KTBs closed the week with strong stationary movement. 3/5 yr spread and 5/10 spread remained unchanged at 7bp and 12bp, respectively. Yields on KTB 3yr and MSB 2yr remained unchanged as well. [Table1] Change in yield by bond type (unit: %) Maturity 11/2 11/9 11/16 Weekly Change(bps) MSB 1yr MSB 2yr KTB 3yr KTB 5yr KTB 10yr [Fig.1] Change in KTB Yield No.502. Nov 19,

4 [Fig.2] Change in MSB Yield No.502. Nov 19,

5 [Fig.3] KTB Spread [Fig.4] BEI No.502. Nov 19,

6 Bank Bonds and Other Financial Debentures Bank Bonds & Others I) Bank Bonds The bond market this week closed without any special momentum since MPC freeze on interest rate. The bond market in this week, mostly Kospi stock index movement and interest rates movements affected by future buy and sell. However, the market closed within range due to burden of absolute interest rate and uncertainty of economic recovery. In the primary market, the bank bonds concentrated on short-term bonds by commercial banks, and other subordinated bonds have issued consistently at relatively weak level compared to references. Credit spread of the AAA bank bonds for 1-year tightened by 1bp, for 2-year and 3-year remained same from last week. Issuance of the bank bonds in this week is 1 trillion and 9,400 billion won which is decreased by 4,200 billon won from last week. Maturity 11/02 11/09 11/16 Weekly change(bps) 1yr 7bp 7bp 6bp -1 2yr 10bp 11bp 11bp 0 3yr 18bp 17bp 17bp 0 (AAA-rated bank bonds) II) Other Financial Debentures In other financial bonds market without any special momentum, the overall spreads tightened slightly in this week. In primay market, it is expanded by 1bp to 5bps compared to references, while AA rated bonds remained same as last week, and A rated bonds have tightened in secondary market. For A rated bonds, Korean capital represented strong in both primary and secondary market as the spreads have tightened compared to references. Credit spread of AA+ other financial debentures in this week tightened by 1p in 1- yr, and 2-yr remained same and 3-yr have tightened by 1bp compared to previous week. The total amoung issued for the other financial debentures in this week is 5,500 billion won which is decreased by 500 billion won. Maturity 11/02 11/09 11/16 Weekly change(bps) 1yr 21p 21p 20p -1 2yr 29p 27p 27p 0 3yr 36p 34p 33p -1 ( AA+-rated other financial debentures) No.502. Nov 19,

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.502. Nov 19,

8 Corporate Bond Market Overview Corporate Bond Yields This week s bond market was dormant with low trade volume and low volatility and continued to show stationary movement throughout the week. The bond market was unresponsive to the U.S Fiscal Cliff issue following the US Presidential election and change in the power structure in China In the corporate bond market, shrinking of the spread in the AA rated companies subsided, and most of the trades were traded within the benchmark interest rates. Overall, the corporate bonds trades increased. Primary Market The total amount issued, matured and outstanding for this week were 1.06 trillion, 650 billion and trillion KRW respectively. The amount outstanding increased by 16.07% compared to last year. New bonds were issued by SH Corporation (AAA), UAM (AA-), LG Innotek (A+), Woori Securities (AA+), Incheon Development & Tourism Corporation (AA+), and Daelim (AA-) New issuances by Daewoo Securities (AA+), Samsung Total (AA0), KT Rental (AA-), Samsung C&T (AA-), Ssangyong Cement (BBB0) and DGB Financial Group (AAA) are planned for next week. Secondary Market Market benchmark showed shrinking volatility and continued its stationary movement, while most of the trades were concentrated in blue-chip corporate bonds. To sum it up, trade volumes of corporate bonds increased, and those trade volumes were heavily concentrated on bonds with high credit ratings. Our evaluation on the spread between 3 year KTB and 3 year corporate bonds (AAA rated, A0 rated) is 23bp and 72bp respectively. No.502. Nov 19,

9 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% % KRW CRS Curves 3. 50% USDI RS 3Y KRW CRS 3Y KRWI RS 3Y KTB 3Y Weekly Changes 0. 20% % KRW IRS Curves 4. 00% % % % KTB KRW I RS KRW CRS USD I RS USD TB % 3. 00% 3. 50% 2. 50% 2. 00% 1. 50% 1. 00% 0. 50% % 2. 50% 2. 00% 1. 50% 1. 00% 0. 50% IRS Spread Trends and Weekly Changes IRS Spread Trend 0. 30% 0. 20% Weekly Changes % 0. 10% % % KRWI RS 5Y- 3Y KRWI RS 10Y- 5Y % % % % KRWI RS 5Y- 3Y KRWI RS 10Y- 5Y % % % % % No.502. Nov 19,

10 Swap Basis Trend and Weekly Changes Swap Basis Trend 0. 50% % % % Weekly Changes 0. 30% SWAP BASI S( 1Y) SWAP BASI S( 3Y) % % % SWAP BASI S( 1Y) SWAP BASI S( 3Y) 0. 10% % Bond/IRS Trend 0. 80% SWAP SPREAD( 1Y) SWAP SPREAD( 3Y) % Weekly Changes 0. 10% % 0. 30% % 0. 01% 0. 02% % % % SWAP SPREAD( 1Y) SWAP SPREAD( 3Y) Major Yields & Spreads Rates US TREASURY 3Y US IRS 3Y KRW CRS 3Y KRW IRS 3Y KTB 3Y IRS 5Y-3Y SWAP BASIS 3Y SWAP SPREAD 3Y Weekly Change Yearly Change 전년말대비 (unit: %) No.502. Nov 19,

11 ELS Market Overview Stock Market As of last week, the KOSPI fell due to concerns over US fiscal cliff and over violence erupted last week between Israel and Hamas. Led by bearish positions from foreign investors, on 15 th, the KOSPI fell points (1.32%) to 1, Major US indicies retreated as US President Barack Obama held tight with the Buffet Rule, and fostered anxieties over US fiscal cliff. It is expected that further decrease in KOSPI to below 1850 is inevitable unless fears over US fiscal cliff, Eurozone angst and tentions on Israel and Palenstinian territories faes away. On 16 th, the KOSPI fell 9.89 points (0.53%) and closed at 1, <Figure 1> KOSPI200, HSCEI Index Trend for the Past Year ELS Primary Market The total number of new issues increased 16 from the previous week to 319, out of which 138 were public and 181 private. The total amount of new public issues increased billion won to billion won and private issues increased billion won to billion won, respectively. The number of new public issues decreased 7 and private issues increased 23 respectively. Weekly Issuance Type Out of the 319 new issues this week, 84.33% were of step down type, 39 of option, and 11 of miscellaneous type. No.502. Nov 19,