South Korea Corporate Bond Yields Hit 30-Month High on July 24 as Supply Drops 86%

According to Korea's Financial Investment Association, on July 24, unsecured corporate bond yields reached their highest levels in approximately 30 months. AA-rated 3-year bonds rose to 4.653%, up 4.2 basis points, marking the highest level since November 14, 2023. BBB-rated 3-year bonds climbed to 10.450%, also up 4.2 basis points and hitting a 2-year 5-month peak. Both rates have surged over 165 basis points compared to a year ago.

The rate increases reflect rising international oil prices following U.S.-Iran tensions and the Bank of Korea's recent policy rate hike. Meanwhile, corporate bond issuance has contracted significantly, with net issuance plunging 86% year-to-date through July 23, declining to just 2.76 trillion won from 19.71 trillion won in the same period last year. The credit spread between corporate bonds and government securities has widened, with market participants demanding higher risk premiums amid elevated uncertainty.