The quantity of financial institution bonds and monetary firm bonds maturing within the first quarter of subsequent yr has been confirmed at 72.4 trillion gained, which is 17.9% greater than in earlier years. Amid the worldwide development of rising rates of interest in international locations like France and Japan, considerations are arising that mortgage charges might rise additional within the first half of subsequent yr as Korean Treasury bond charges are leaping.
In accordance with the monetary sector on Dec. 15, financial institution bonds and monetary firm bonds maturing within the first quarter of subsequent yr quantity to 52.8 trillion gained and 19.6 trillion gained, respectively. In comparison with the common for the primary quarters of 2023-2025, financial institution bonds are about 24.5% larger and monetary firm bonds are about 2.5% larger.
Taking a look at financial institution bonds, the amount of maturing bonds within the second quarter of subsequent yr (59.8 trillion gained) can be bigger than the three-year common of 53.2 trillion gained. The third quarter (46.1 trillion gained) and fourth quarter (51.8 trillion gained) volumes are smaller than earlier than. For monetary firm bonds, aside from the primary quarter, the maturing quantities within the second and third quarters are smaller than earlier than. The fourth quarter is comparable. An official from a industrial financial institution defined, “Because of the rest of liquidity protection ratio (LCR) regulatory ratios, there was excessive demand for financial institution bond issuance throughout banks on the finish of final yr.”
Market analysts level out that the primary quarter of subsequent yr may very well be a essential interval. Monetary bonds are evaluated because the most secure bonds after Korean Treasury bonds. They’re affected by modifications in Korean Treasury bond charges and their very own provide and demand. Many level out that market charges might rise contemplating the rise in authorities bond charges attributable to fiscal instability in main Western European international locations, the potential for Japan elevating its base charge, and the massive quantity of Korean Treasury bonds and financial institution bonds subsequent yr. The quantity of company bonds maturing subsequent yr can be estimated to be round 78 trillion gained, which is 10 trillion gained greater than this yr.
This might result in rising mortgage charges, rising the burden on small and medium-sized enterprises, self-employed people, and bizarre residents. Monetary Companies Fee Chairman Lee Eok-won’s instruction on Dec. 16 to “assessment the maturity construction of company bonds, financial institution bonds, and monetary firm bonds subsequent yr, in addition to the dimensions of bonds held by the monetary sector and the soundness standing attributable to rising rates of interest” is for that reason. Though Korea’s inclusion within the World Authorities Bond Index (WGBI) subsequent yr is predicted to herald 75-90 trillion gained in overseas funds, it’s scheduled for after April subsequent yr, limiting its skill to ease market burden within the first quarter. An official from the monetary sector expressed concern, saying, “Trade charges and bond charges proceed to be unstable, so it appears essential to handle effectively till early subsequent yr,” and “If market charges rise, they are going to inevitably have an effect on mortgage charges.”
Certainly, Korean Treasury bond charges have been constantly rising this yr. The three-year Korean Treasury bond charge, which was 2.507% yearly at the start of this yr, traded across the 3% stage on Dec. 16. The 5-year maturity Korean Treasury bond additionally jumped from 2.681% to three.25% throughout the identical interval. That is being totally mirrored in mortgage charges. Final month’s Value of Funds Index (COFIX) based mostly on new mortgage quantities was 2.81%, rising by 0.24 share factors in comparison with the earlier month. This marks three consecutive months of will increase. The 6-month variable-rate mortgage mortgage charge ranges of the 4 main banks (KB Kookmin, Shinhan, Hana, Woori) are within the 3.91-5.40% vary, with each the higher and decrease bounds rising in comparison with a month in the past (3.82-5.33%). Yang Jun-seok, professor of economics at Catholic College, mentioned, “Not solely domestically but in addition in america, Europe, and all over the world, the amount of presidency bonds maturing subsequent yr is substantial,” including, “If banks go this on to mortgage charges, company funding might additionally shrink.”
The Monetary Companies Fee introduced that it’s going to proceed market stability applications of not less than 100 trillion gained subsequent yr to organize for the potential for funding channels for monetary corporations and common companies being constrained. From January to November this yr, 11.8 trillion gained was injected for bond market stability together with non-investment grade company bonds and industrial paper (CP), and plans are to produce as much as 37.6 trillion gained in liquidity to bond and short-term funding markets subsequent yr as effectively. Help applications of as much as 60.9 trillion gained may also be operated for the mushy touchdown of actual property venture financing (PF). Chairman Lee acknowledged, “We are going to carefully monitor market situations and implement market stability measures boldly and preemptively when vital.”
