Some Bonds Are Still Called Ugly Ducklings

Although the credit crunch in the local bond market is gradually easing, the gap between yields on bonds with good credit ratings and those with low ratings is widening because there is little demand for the low-rated notes, according to the Bank of Korea.

On Wednesday, the spread between the average yields on three-year corporate bonds rated AA- and debts rated BBB-, the lowest investment grade, stood at 4.97 percentage points, the central bank said.

The yield difference between AA- bonds and BBB- notes widened from 3.17 percentage points at the end of last October to 3.52 percentage points a month later to 3.69 percentage points at the end of last year.

At the end of January the yield difference had expanded to 4.18 percentage points.

The average yield on bonds rated AA- slipped to 6.49 percent Wednesday from 8.12 percent at the beginning of the year, whereas the average yield on BBB- debts declined to 11.46 percent from 11.82 percent during the same period, according to a report by the central bank

by Cheong Chul-gun