Rate cut gives company bond sales shot in arm

Company bond sales rose to a three-week high after the central bank reduced interest rates for the second time since July to shield Asia’s fourth-largest economy from a global slowdown.

Issuances increased to 1.13 trillion won ($1 billion) from 650 billion won last week, the most since 2.02 trillion won in the week ended Sept. 22, according to data compiled by Bloomberg. That compares with a weekly average of 1.08 trillion won this year, the data show. Yields on three-year corporate notes fell to a record low of 3.23 percent last week.

“Market conditions for issuers have improved again, and companies will turn to bonds,” Lee Soo-jung, a credit analyst with SK Securities in Seoul, said by telephone on Thursday. “Demand is also strong.”

Bank of Korea Gov. Kim Choong-soo cut the benchmark 7-day repo rate to 2.75 percent. The central bank also lowered its forecast for the nation’s growth in 2012 to 2.4 percent.

NH Financial Group, a unit of National Agricultural Cooperative Federation, sold 500 billion won of bonds, the biggest sale this week. It offered 100 billion won of three-year notes to yield 3.01 percent, and 400 billion won of October 2017 securities at a yield of 3.12 percent.

SK Broadband, a unit of SK Telecom, the country’s largest mobile-phone operator, offered 130 billion won of October 2015 notes to yield 3.14 percent, and 120 billion won of five-year securities at a yield of 3.27 percent.

“The low-rate trend is continuing now, and there were expectations of a rate cut this month because there was no change last month,” said Chung Yang-ki, a spokesman at SK Broadband. “Yields continued to slide, so we felt the timing was good.”

The Seoul-based company will use the proceeds to refinance maturing debt, he said.

OCI offered 200 billion won of notes, and Seah Besteel, a steel products maker, sold 100 billion won of bonds, the data show.

“From the issuer’s point of view, yields are low, so there’s no reason not to come to the market,” said Hwang Won-ha, a credit analyst at HMC Investment Securities.

Asiana Airlines and Hyundai Oilbank are among borrowers planning to sell bonds in the coming days, according to preliminary data compiled by Bloomberg.

Korean companies raised 44.2 trillion won from bond sales so far this year, compared with 43.7 trillion won in the same period last year, the data showed. Bloomberg