[E-Daily Marketin LEE GEON-EOM Reporter] While the domestic corporate bond market has frozen solid, the foreign currency bond market continues to surge. Analysts say that as investor sentiment in the domestic corporate bond market has sharply contracted due to interest rate volatility and concerns over a credit crunch, investors are turning their attention to the global bond market, which offers relatively abundant liquidity. Given the substantial volume of foreign currency bonds maturing in the second half of the year, the rush by companies to raise funds overseas is expected to continue for the time being.

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According to BondWeb on the 15th, new foreign currency bond issuances from January 1 of this year through the previous day totaled 56.7637 trillion won (based on the exchange rate as of the 14th), a 13.4% increase compared to the same period last year (50.0475 trillion won). The number of issuances during the same period rose from 96 to 101.

Looking at the details, the U.S. dollar (USD) accounted for an overwhelming share of the total issuance volume at 42.8687 trillion won (67 issues). This was followed by the euro (EUR) at 6.7437 trillion won (6 issues), then △the Australian dollar (AUD) at 2.9645 trillion won(5 issues), the Hong Kong dollar (HKD) at 1.9268 trillion won (12 issues), the British pound (GBP) at 960 billion won (1 issue), the Japanese yen (JPY) at 722 billion won (5 issues), and the Chinese yuan (CNY) at 205 billion won (2 issues).

This stands in stark contrast to the domestic corporate bond market, which is experiencing a sharp contraction and an accelerating outflow of funds. The domestic corporate bond market has seen a significant decline in issuance volume due to rising interest rates and increased uncertainty following the default by JR GLOBAL REIT(348950). In fact, the total issuance of domestic corporate bonds (public and private placements combined) this year amounted to 46.6594 trillion won, a 17.4% decrease compared to the same period last year (56.4950 trillion won).

In particular, net issuance—the difference between issuance volume and redemptions—recorded a negative (-) 4.9287 trillion won. This means that companies repaid more debt upon maturity than they raised through new issuance, effectively signaling that the corporate bond market has shrunk.

The market expects the rush to issue foreign currency bonds to continue into the second half of the year. This is because the volume of foreign currency bonds maturing by the end of the year alone amounts to approximately 37.0768 trillion won (102 issues) when converted to Korean won. Given that demand for refinancing and new funding for overseas investments is firmly supported, observers predict that companies’ efforts to raise funds globally will continue steadily for the time being.

Looking at the details, U.S. dollar (USD) maturities total 29.413 trillion won (60 issues), accounting for about 80% of the total maturing volume. In addition to major currencies such as EUR 4.0625 trillion (8 transactions), HKD 802 billion (10 transactions), and JPY 579.5 billion (5 transactions), maturities in various other currencies—including the Brazilian real (BRL) and CNY—are also lined up one after another.

The acceleration in corporate foreign currency bond issuance is driven by favorable funding conditions in the global investment-grade (IG) bond market and robust pent-up demand for Korean Paper (KP). According to Hana Securities, since last March, the average reduction in the issuance spread for Korean Paper (KP) has been 36 basis points (1 bp = 0.01 percentage point), significantly exceeding the cumulative reduction for U.S. investment-grade (IG) bonds this year (28 bp).

This suggests that while investor sentiment in Korea is waning due to credit risks, overseas investors are flocking to Korean Paper, willing to accept even lower premiums.

A corporate bond market official stated, “In the domestic corporate bond market, securing demand itself is difficult due to interest rate volatility and other factors, so companies’ financing burdens have reached an extreme level,” adding, “From the perspective of companies that must respond to large-scale maturities, they have no choice but to turn to the global market, which still has the capacity to absorb liquidity.”

He added, “In the second half of the year, this rush to issue Korean bonds targeting such abundant global liquidity will clearly continue to drive the market.”