Korean companies issue wave of offshore bonds

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Korean companies issue wave of offshore bonds

South Korean companies are making up for lost time after the slowest first half in five years for offshore bond issuance as they seek to lock in low rates.

The Export-Import Bank of Korea and Korea Resources Corp. sold a combined $1.1 billion of notes last week, while Kookmin Bank, Korea Gas Corp. and Korea National Oil Corp. have hired banks to assist with offerings.

Just $13.48 billion in international debentures has been issued this year from Korea, a 39 percent drop from 2014 and the lowest since 2010.

Slower issuance and a perception of safety have helped Korean dollar bonds weather a global bond rout spurred by the prospect of higher U.S. rates and signs of inflation in the euro region. Korean issuers sold $1.2 billion of bonds since June 15, the busiest second half for that month since 2012 in dollar terms.

“There could be a move from issuers to lock in rates ahead of Fed rate hikes and market volatility that may increase in the second half,” Whang Youn Sung, Seoul-based director of global capital markets at Bank of America Corp.’s local unit, said Friday. “Offshore sales were slow in the first half due to a lack of maturing debt and low domestic interest rates. Offshore sales may increase a bit in the second half unless market volatility increases more than expected.”

Emerging-market bond funds saw a fifth consecutive week of outflows, according to a Standard Chartered PLC note. Some $344 million withdrawn in the week ended June 24 versus $190 million in the previous week. Developed market bond fund outflows slowed to $3.37 billion versus $10.18 billion in the previous week.

Global developed-market sovereign bonds have lost 2.2 percent the past three months. The Fed is projected to raise rates for the first time since 2006 this year, from data showing continued U.S. economic improvement.

Korean dollar notes have slipped just 0.4 percent since the end of March, according to JPMorgan Chase & Co. indices.

The Export-Import Bank of Korea, the nation’s biggest issuer of international bonds, sold $600 million of 5.5-year notes at 97.5 basis points over Treasuries and $400 million of 2026 debt at a 95 basis point premium.

The bank’s sale of longer-dated debentures was driven by a flat yield curve on Korean dollar bonds, according to Yoon Hee Sung, its director-general of international financing.

The spread for Korean dollar bonds over Treasuries rose to 134 basis points on June 22, the highest since March 2014.

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