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

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NO. 359 Feb 08 2010 Rate changes in bond indices KTB & MSB Market Overview Bank Bonds and Other Fin.

1 NO. 359 Feb 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. Hwan Lee ( ), 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) All KTB MSB Corp KOBI30 KOBI Market value weighted average YTM by ty pe Bond Index Duration All KTB 2.00 MSB Corp 1.50 KOBI30 KOBI All KTB MSB Corp 4.20 KOBI30 KOBI

3 KTB & MSB Market Overview KTB & MSB Last week yields on 3yr and 5yr KTBs dropped by 6bps to 4.21% and 4bps to 4.78%. That on 10yrs also declined by 2bps to 5.32%. While local KTBs market got off to a strong start following the RBA (Reserve Bank of Austrailia) s decision to leave the key interest rate unchanged, short-term market contined its strong streak. The market is expected to follow the BOK's interest rate decision expected next week. 3yr and 5yr KTBs spread expanded to 57bps and 5yr and 10yr s also spreaded out to 54bps. Yield on 1yr MSBs shed 8bps to 3.22%. That on 2yrs, however, added 1bp to 4.11%. 1yr and 2yr MSB spread expanded to 89bps. [Fig.1] Change in yield by bond type KTB 1yr KTB 2yr KTB 5yr KTB 10yr KTB 3yr No.351

4 [Fig.2] Change in yield by bond type MSB 1yr MSB 2yr [Fig.3] KTB SPREAD 5_3 SPREAD 10_5 SPREAD (bp) No.351

5 [Fig.4] 3yr Credit SPREAD SPECIAL BANK COPORATE [Fig.5] 5yr Credit SPREAD 120 SPECIAL BANK COPORATE

6 Bank Bonds and Other Financial Debentures Bank Bonds & I) Bank bonds Others With KTBs strong, bank bonds also gained. Short-term bank bonds, especially matured within 1yr, extended their gains. While bank bonds spread were largely bullish, especially short-term spread tightened. 1yr and 2yr bank bonds spread, respectively tightened by 3bps to 49bps and 7bps to 28bps. 3yr spread also narrowed 3bps to 62bps. New issuance of bank bonds amounted to 1.3 trillion won with a significant rise. II) Other Financial Debentures Other financial debentures also rose overall. However, some were traded bearish in secondary market. 1yr other financial debentures spread expanded by 2bps to 200bps. 2yr and 3yr spread, however, respectively tightened by 8bps to 94bps and 2bps to 133bps. New isusnace of other financial debentures totaled 500 billion won. I) Change in Bank Bond AAA Yield YTM(%) M 6M 9M 1Y 1.5Y 2Y 2.5Y 3Y 4Y 5Y Maturity

7 Change in Bank Bond AAA Credit Spread Bank AAA 1yr - MSB 1yr,bp Bank AAA 3yr - MSB 3yr,bp Change in Credit Spread of Other Financial Debentures AA Other Fin. Debentures AA 1y r - MSB 1y r,bp 320 Other Fin. Debentures AA 3y r - KTB 3y r,bp

8 Corporate Bond Market Overview Primary Market This week s new corporate issues were, SK 249-1, (150 billion & 100 billion won), Hanil Cement 56 (30 billion won), Hyundai Securities 28 (200 billion won), STX 83 (150 billion won), Korean Airlines 38-1, 38-2 (100 billion & 200 billion won), BNG Steel 189 (30 billion won) totaling 960 billion won, whereas maturing volume totaled 605 billion won including Shinhan Financial Group 24-2 (70 billion won), SK 232 (200 billion won), Doosan Infracore 5-1 (140 billion won), Korea Savings Bank 4 (10 billion won), Kolon 201 (35 billion won), Hyundai Logistics 9 (40 billion won), Dongbu Steels 129 (40 billion won), Doosan 273 (50 billion won), BNG Steels 185 (20 billion won), leading to a net issue of 355 billion won. For the upcoming week, new corporate issues on schedule are Hyundai Development Company 133 (200 billion won), Hyundai Merchant Marine 173 (260 billion won), LG Innotek 25-1 (50 billion won), 25-2 (150 billion won), KT (240 billion won), (190 billion won), Hanhwa 196 (100 billion won), Standard Charterd Korea 1 (100 billion won), Hanjin Heavy Industries 123 (280 billion won), whereas Korean Airlines 25-1 (200 billion won), STX 72 (30 billion won), LG Innotek 17-1 (40 billion won), Hyundai Development Company (140 billion won), Doosan Engine 3-1 (50 billion won), GS Construction 120 (100 billion won), Hanjin Shipping 63-1 (30 billion won), Korean Airlines 34-1 (150 billion won) will mature, leading to a net increase of 1000 billion won. [Figure 1] Corporate Bonds Issued and Matured (unit: 100m won) 39,000 36,000 33,000 30,000 27,000 24,000 21,000 18,000 15,000 12,000 9,000 6,000 3,000 Issue Amount(left) Maturity Amount(left) Outstanding Refunding2/5 Equipment Operation Etc. 0 08/08 09/05 10/02 10/31 11/28 12/26 01/23 02/20 03/20 04/17 05/15 06/12 07/10 08/07 09/04 10/01 10/30 11/27 12/24 1/22 1,080,000 1,040,000 1,000, , , , , , , , ,000 7

Secondary Market This week s secondary market trading amount was 2362.4 billion won, increased by 178.3 billion won in a week. Based on ratings, AA bond trading was most active at 43.87% (1034.

9 Secondary Market This week s secondary market trading amount was billion won, increased by billion won in a week. Based on ratings, AA bond trading was most active at 43.87% ( billion won). A bond trading was at 37.39% (881.5 billion won). Specifically, those traded actively were as follows: AA rating bonds such as GS Caltex, SK, SK Energe, Lotte Chilsung Beverage, LG Household & Health Care, Hyundai Motors, LG Telecom, KIA Motors, Hyundai Steel, A rating bonds such as Lotte Construction, Korean Airlines, Dongkuk Steel, Doosan Infracore, Hanhwa. Total trading excluding new issues increased by 8.16% from the previous week at billion won. Based on ratings, AAA bonds were at 14.84% of the market, AA bonds were at 43.87% of the market, A bonds were at 37.39% of the market, and BBB bonds were at 3.89% of the market. Based on remaining maturity, those under 1 year maturities were at 20.55% of the market, and those between 1~3 years covered 71.15% of the market. [Figure 2] Corporate Bonds Trading n) (unit: 100m wo [Figure 3] Trading Activity Trend & Maturity-wise Weights (unit: %) 30,000 ~1y 1y~3y 3y~5y 5y~ 25,000 20,000 15,000 10,000 5, /09 02/13 03/20 04/24 05/29 07/03 08/07 09/11 10/16 11/20 12/24 1/29 8

10 Corporate Bond Yields & Spreads The domestic bond market started weak as 2010 January CPI up 3.1% (YoY) - highest incease in 9 months and stock market climbed. However, during the mid-week, the market was bullish after Australia s official interest rate kept on hold at 3.75%, US stocks tumbling, and safe financial asset preference caused by Eoropean fiscal crisis. As of the 5 nd of Feburary, AAA public corporate bonds 3 year yields decreased by 7bps at 4.94%, which is 73 bps above the KTB of commensurate maturity, and A0 yields decreased by 8 bps at 5.75% which is at 154 bps above KTB of commensurate maturity. [Figure 4] AAA 3yr Credit Spread Trend (unit: %) Bank Bond AAA Corporate Bond AAA Corporate Bond A- Other Fin Debentures AA M 6M 9M 1Y 1.5Y 2Y 2.5Y 3Y 4Y 5Y 7Y 10Y [Figure 5]Weekly Average Yields (unit: %) 8.50 KTB(left) AAA3Y(left) Spread(right)

11 Convertible Bond Market During this week, Stock market was affected by concerns over fiscal deterioration of some European countries such as Greece, Portugal, and Spain. KOSPI lost points to 1, points and the KOSDAQ gained 0.8 points to points. <Figure 7> Weekly Stock Market 10

Convertible Bonds Trading Trading in convertible bonds and bond-with-warrants were as follows: KIA Motors 275 BW (20.83 billion won), Mirae Asset Securities 1 CB (5.

12 Convertible Bonds Trading Trading in convertible bonds and bond-with-warrants were as follows: KIA Motors 275 BW (20.83 billion won), Mirae Asset Securities 1 CB (5.79 billion won), Daehan Wires 146 BW (2.16 billion won), and Hyundai Cement 60 EB (1.9 billion won). Parity levels of junk ITM bonds averaged at 1.918, slightly lower than the previous week s <Figure 8> Junk Rating Parity Trend (unit: %) *ITM (Parity 1.2 and higher, ATM: Parity 0.8~1.2, OTM: Parity 0.8 and below) 11

13 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% -0.70% -1.70% KRW CRS Curve Trend 5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% USD TB 3Y KRW CRS 3Y KTB 3Y USDIRS 3Y KRWIRS 3Y M 09M 02Y 04Y 06Y 08Y 10Y Weekly Changes 0.20% 0.00% -0.20% KTB KRW IRS KRW CRS USD IRS USD TB -0.06% -0.04% KRW IRS Curve Trend 5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 0.05% -0.04% -0.07% M 09M 02Y 04Y 06Y 08Y 10Y IRS Spread Trend and Weekly Changes IRS Spread Trend 0.30% 0.20% 0.10% Weekly Changes 0.03% KRWIRS 5Y-3Y KRWIRS 10Y-5Y 0.02% 0.02% 0.00% -0.10% -0.20% -0.30% -0.40% KRWIRS 5Y-3Y KRWIRS 10Y-5Y 0.02% 0.01% 0.01% 0.00% 0.00% Swap Basis Trend and Weekly Changes Swap Basis Trend Weekly Changes 12

14 0.50% -0.50% -1.50% SWAP BASIS(1Y) SWAP BASIS(3Y) 0.20% 0.09% -2.50% -3.50% 0.00% -4.50% -0.02% -5.50% -6.50% SWAP BASIS(1Y) SWAP BASIS(3Y) -0.20% Bond/IRS Trend 0.80% SWAP SPREAD(1Y) SWAP SPREAD(3Y) Weekly Changes 0.20% 0.30% -0.20% -0.70% -1.20% 0.05% SWAP SPREAD(1Y) SWAP SPREAD(3Y) 0.02% 0.00% Major Yield Weekly Yearly & Spread Rates Change Change US TREASURY 3Y US IRS 3Y KRW CRS 3Y KRW IRS 3Y KTB 3Y IRS 5Y-3Y SWAP BASIS 3Y SWAP SPREAD 3Y (unit: %) 13

15 ELS Market Overview Stock Market After fluctuation near the 1600 level, the KOSPI collapsed 3.05% to 1567 on Friday. Global stock market was affected by fiscal crisis of some European countries such as Portugal, Italy, Greece, and Spain. <Figure 1> KOSPI200, HSCEI Index Trend for the Past Year ELS Market Primary This week, public issues were 65 new issues and private issues were 74 issues, totaling 139 new issues. Total issue amount of public issues totaled billion won, and private issues totaled billion won. The number of public issues increased by 16 and the iussue amount decreased by billion won and the number of private issues and the issue amount decreased by 47 and billion won respectively. Weekly Issuance Type Out of the 139 new issues, 66.67%, or 92 issues, were Step-Down Hi-Five types, and there were 42 option types, 1 Cliquet type, and 4 miscellaneous types. 14

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

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