[Edaily Marketin KIM YEON-SEO Reporter] The slump in the non-investment-grade corporate bond market—which has been centered on BBB-rated bonds this year—is expected to spread to A-rated companies next year. As the burden of issuing corporate bonds increases due to high interest rates and deteriorating investor sentiment, A-rated companies are also expected to expand their reliance on bank loans for financing. Consequently, there are concerns that polarization in the corporate bond market, currently dominated by high-quality bonds, may intensify.

According to BondWeb on the 14th, the total amount of non-investment-grade corporate bonds maturing next year is 14.6735 trillion won. By credit rating, A+ bonds accounted for the largest share at 7.932 trillion won, followed by A0-rated bonds at 4.0505 trillion won, A-rated bonds at 1.978 trillion won, BBB+ rated bonds at 480 billion won, BBB0-rated bonds at 166 billion won, and B-rated bonds at 67 billion won. Approximately 41% of the total—6.0195 trillion won—is concentrated in the first quarter. Sub-investment-grade bonds typically refer to corporate bonds rated A+ or lower.

◇Net Redemption of Corporate Bonds Continues… Bank Loans Increase

This year’s corporate financing market saw simultaneous net redemptions of corporate bonds and an increase in bank loans. According to the Bank of Korea’s “October 2026 Financial Market Trends,” corporate loans from banks rose by 10.2 trillion won last month, marking the second consecutive month of increases in the 10 trillion won range following the previous month (10.7 trillion won). The outstanding balance of corporate loans stands at 1,451.8 trillion won. In contrast, corporate bonds saw a net redemption of 1.7 trillion won, continuing the trend of net redemptions following the previous month’s figure (-3.4 trillion won).

In particular, the non-investment-grade bond market contracted sharply, centered on BBB-rated bonds. Investor sentiment deteriorated due to successive defaults by JR Global REIT and Joongang Group, compounded by the burden of high interest rates. Issuance of publicly offered BBB-rated corporate bonds has virtually ceased since last August, and there are no book-building events scheduled through the end of the year.

Companies typically issue new corporate bonds to repay existing debt when existing bonds mature. However, as issuance conditions have deteriorated, there is a growing incentive to utilize alternative funding sources such as bank loans and commercial paper (CP). Analysts note that the fact that funding rates for corporate bonds have risen above those for bank loans has also played a role.

Kim Sang-man, an analyst at Hana Securities, stated, “Amid sluggish corporate bond issuance in 2026, there has been a clear trend toward increased short-term financing and bank loans.” He added, “From the perspective of funding costs, the gap between corporate bond yields and short-term interest rates has been widening for some time, and recently, corporate bond yields have even surpassed those of bank loans.”

◇Even A-rated Companies to Expand Bank Borrowing Next Year… Concerns Over Deepening Polarization

The market expects this trend to extend to A-rated companies next year. Although a significant volume of corporate bonds is set to mature, the outlook is that refinancing through bank loans will increase rather than new corporate bond issuance, as high interest rates and a preference for high-quality bonds persist.

The concern is that a decline in corporate bond issuance by A-rated companies could further contract the market for non-investment-grade bonds. Since A-rated corporate bonds have lower trading volumes than AA-rated or higher bonds, new issuances play a crucial role in setting market interest rates. In fact, in 2024, as issuance and investment demand increased, the yield spread between A-rated and AA-rated corporate bonds narrowed by approximately 40 basis points (1 bp = 0.01 percentage point).

Conversely, if issuance declines as it has this year, the reduction in investment opportunities and market liquidity could make it difficult for investor sentiment to recover. This, in turn, could lead to worsening issuance conditions, potentially solidifying a corporate bond market structure centered on high-quality bonds.

Yoon Won-tae, an analyst at SK Securities, stated, “We expect the issuance volume of A-rated corporate bonds in 2027 to be unfavorable, despite maturity volumes remaining at a level similar to 2026, due to the impact of polarized investor sentiment in the bond market.” He added, “We anticipate that companies will expand their financing through bank loans, as lending conditions are expected to remain more favorable than those for corporate bond issuance.”