Korea’s HF issues euro covered bond at negative yield A Korean public financial firm issued its 1-billion euro covered bond with a yield of -0.02%
Translated by Ryu Ho-joung 공개 2020-02-04 08:00:00
이 기사는 2020년 02월 04일 08:00 thebell 에 표출된 기사입니다.
Korea Housing Finance Corporation (HF), the South Korean public financial company that provides housing loans, has sold its 5-year euro-denominated covered bond at a negative interest rate, the first such case for Asian issuers.The HF has successfully placed its one-billion euro social covered bond issue in one tranche in the European market on January 29. The bond was issued at a premium, with a coupon of 0.01 percent and a yield of -0.02 percent. This represented a spread of 24 basis points over mid-swap, or three to five basis points tighter than the initial price guidance.
A continued decline in the euro mid-swap rates has made most of the Asian lenders cautious about new offerings, as this could lead to weak demand from institutional investors. Recently some Singaporean and Japanese banks chose to sell longer-dated bonds or issue bonds in the U.S. dollar in a bid to attract more investors.
But the HF has made the opposite move, pushing ahead with its plan to issue a euro-denominated bond with a 5-year maturity, which has been repeated every year since 2018. The company also doubled its target deal size to one billion euros.
The company’s AAA-rated covered bond met strong demand from investors, as growing concerns over the coronavirus hit global markets last week. Standard and Poor’s (S&P) assigned an AAA rating to covered bonds issued by the HF in 2019.
The HF has put continuous effort to widen the investor base in the European bond market since its first 500 million euro offering of a covered bond two years ago. The company recently held road shows across several European countries including Finland, broadening its focus to potential demand from Scandinavian institutional investors.
Euro-denominated covered bonds are still at an early stage compared to other types of Korean papers, which refer to foreign currency-denominated securities issued abroad by South Korean entities. This time, the HF received about 1.4 billion euros in orders, with the order book mostly filled with small orders worth 100 million euros or so.
Going forward, the HF is expected to accelerate its efforts to strengthen its relationship with large European institutional investors, which is essential to regularly place large-scale euro-denominated bond issues. Some market watchers also predict that more South Korean financial companies could join in the issuance of euro-denominated covered bonds in the future, which may lead to a faster expansion of the investor base.
(By reporter Pi Hye-rim)
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