Banks’ bond sales abroad to stay high

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Banks’ bond sales abroad to stay high

Demand for bonds sold by local banks and companies overseas is likely to remain brisk this year as concerns over the U.S. fiscal cliff and euro zone debt crisis have softened, a report showed yesterday.

Korean banks and companies raised $39.1 billion by selling bonds in overseas markets in 2012, up 32 percent from 2011, according to the report by the Korea Center for International Finance.

The bond sales came as good news for the Korean institutions as they narrowed their interest rates to just 130 basis points above the yields on five-year U.S. Treasuries last October, it added. This compares to a spread of 300 basis points in early 2012. A basis point is 0.01 percentage point.

Brisk sales of Korean bonds overseas last year came as a spate of sovereign rating upgrades by global credit appraisers and near-zero interest rates for advanced economies raised investors’ appetite for such debt, it said.

The report said investors’ demand for Korean bonds is likely to remain strong this year due to healthier levels of global liquidity. The cost of selling debts is expected to gradually decline but not to an overly large degree.

It added that the amount of maturing debt due in 2013 will reach an estimated $20.4 billion, down from $26.9 billion projected for last year, meaning less refinancing and a reduced chance of oversupply in the market, it noted.

“But as the maturing five-year debt due next year is likely to hit a record, pre-emptive borrowing from the second half of 2013 will be crucial to smoothly refinance such debt,” the report added.

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