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

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1 NO. 505 Dec 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.505. Dec 10,

3 KTB & MSB Market Overview KTB & MSB KTB markets opened this week with strong movement due to foreign investors KTB futures buying, but the rise in KTBs was limted by an increase in KOSPI. Because of weak demand at KTB 30yr auction, long-term yield curve stiffened. In the middle of the week, surge in KOSPI and SHANGHAI COMPOSITE INDEX, and foreign investors short positions on KTB futures led to rise in KTB yields. However, KTB reverted back as the yields climed excessively. As institutional investors took long positions on KTB futures, yields on KTB fell further. Last of the week the KTB markets closed the week with strong movement since foreign investors returned to long postions on KTB futures. 3/5 yr spread and 5/10 spread were widened to 12bps and 13 bps, repectively. Yield on KTB 3yr fell 3bps due to new KTB 3yr issues. One the other hand, MSB 2yr fell by two basis points. [Table1] Change in yield by bond type (unit: %) Maturity 11/23 11/30 12/07 Weekly Change(bps) MSB 1yr MSB 2yr KTB 3yr KTB 5yr KTB 10yr No.505. Dec 10,

4 [Fig.1] Change in KTB Yield [Fig.2] Change in MSB Yield No.505. Dec 10,

5 [Fig.3] KTB Spread [Fig.4] BEI No.505. Dec 10,

6 Bank Bonds and Other Financial Debentures Bank Bonds I) Bank Bonds & Others The bond market in this week started bearish due to increase in KOSPI and foreign investors KTB futures buying and the expection of recovery in Chinese securities. However, the bond market ended bullish as purchases of bond futures by foreign investors at the end of week. The bank bond market, the numbers of issnaces have decreased in general. The spreads have expanded for the short-term bonds less than 1-year in secondary market. Credit spread of the AAA bank bonds for 1-year expanded by 2bps, 2-year expanded by 1bp, and 3-year remained same from last week. Issuance of the bank bonds in this week is 7,100billion won which is decreased by 17,190 billon won from last week. Maturity 11/23 11/30 12/07 Weekly change(bps) 1yr 6bp 8bp 9bp +1 2yr 11bp 12bp 15bp +3 3yr 17bp 17bp 20bp +3 II) Other Financial Debentures (AAA-rated bank bonds) In other financial debentures market, the credit spreads have expanded while the number of trades represented diminishing pattern continued from last week. New issuances have issued at reference level and relatively bearish movement in primary market. Credit spread of AA+ other financial debentures in this week expanded by 3bps, and 2-yr and 3-yr expanded by 4bps from last week. The total amount issued for the other financial debentures in this week is 5,950billion won which is increased by 1,800billion won. Maturity 11/23 11/30 12/07 Weekly change(bps) 1yr 20p 22p 25p +3 2yr 26p 26p 30p +4 3yr 32p 32p 36p +4 ( AA+-rated other financial debentures) No.505. Dec 10,

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.505. Dec 10,

8 Corporate Bond Market Overview Corporate Bond Yields This week s bond market started bearish as expection of recovery in Chinese economy set in, however, the week ended bullish after purchases of bond futures by foreign investors and short covering drove the market up. The volatility remained low and bond market continued its rangebound trade. In the corporate bond market, yield spread expanded as investors diverted from trading as the end of year nears. Corporate bond market was relatively bearish compared to the benchmarket index due to low trade volume and unsold bonds. Primary Market The total amount issued, matured and outstanding for this week were trillion, 910 billion and trillion KRW respectively. The amount outstanding increased by 15.99% compared to last year. New bonds were issued by Hyundai Wia (AA-), SK Energy (AA+) and SH Corporation (AAA). The primary market was dull as the demand for finance stayed low as the year end nears, and primary issues were concentrated in AA rated bonds. New issuances by Lotte Insurance (subordinated bonds, A0), POSCO construction (AA-), CJ CheilJedang (AA0), SK Shipping (A0), Seoul Newspaper (BBB+), Hanwha (A0), Korea Airlines (A0), Hite Jinro (A+) are planned for next week. Secondary Market The secondary market showed low trade volume throughout the week as the investors become cautious on the credit market as the year end approaches, and stop loss trades fuelled the already bearish market. Our evaluation on the spread between 3 year KTB and 3 year corporate bonds (AAA rated, A0 rated) is 27bp and 77bp respectively. No.505. Dec 10,

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% % USDI RS 3Y KRW CRS 3Y KRWI RS 3Y KTB 3Y KRW CRS Curves 3. 50% Weekly Changes 0. 20% % KRW IRS Curves 4. 00% % % 0. 06% 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% 0. 10% % % KRWI RS 5Y- 3Y KRWI RS 10Y- 5Y Weekly Changes KRWI RS 5Y- 3Y KRWI RS 10Y- 5Y % % No.505. Dec 10,

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% 0. 08% 0. 08% % % Bond/IRS Trend 0. 80% SWAP SPREAD( 1Y) SWAP SPREAD( 3Y) % Weekly Changes 0. 10% 0. 30% % % % % % 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.505. Dec 10,

11 ELS Market Overview Stock Market Though the German parliament agreed to support Greece which relieved tension on eurozone crisis, the US fiscal cliff remained stiff and restrained the KOSPI to soar up. This week, foreign investors were on strong bullish position. They were mainly focused on buying large-cap stocks such as Samsung Electronics and LG Chem. As a result, on 7 th December the KOSPI rose points (1.27%) compared to last week to close at 1, points. <Figure 1> KOSPI200, HSCEI Index Trend for the Past Year ELS Primary Market The total number of new issues decreased 52 from the previous week to 235, out of which 74 were public and 161 private. The total amount of new public issues decreased billion won to billion won and private issues increased billion won to billion won, respectively. The number of new public issues decreased 66 and private issues increased 14 respectively. Weekly Issuance Type Out of the 235 new issues this week, 146(62.13%) were of step down type, 80 of option, and 9 of miscellaneous type. No.505. Dec 10,