2023-10-29 07:14:29
CP 91-day 4.29%, highest in 8 months
▲ Seoul Newspaper DB The interest rate on commercial paper (CP), a means of raising short-term funds for companies, is rising sharply. The financial difficulties of domestic companies appear to be worsening due to the sharp rise in U.S. Treasury bond interest rates and the followingmath of the war between Israel and Palestine.
According to the Korea Financial Investment Association on the 29th, the CP 91-day interest rate rose for 15 consecutive trading days from the 6th and recorded 4.29% as of the 27th. This is the highest level in 8 months since 4.32% on February 6th. As of the 1st of last month, the CP 91 interest rate remained at 3.99%, but has risen sharply by 0.30 percentage points over the past two months.
As the bond market froze due to concerns regarding prolonged high interest rates in the United States, it is interpreted that companies that found it difficult to bear long-term high interest rates through corporate bonds flocked to the CP market, a short-term funding channel. This month, uncertainty in the financial market has increased due to the war between Israel and Palestine. The 10-year U.S. Treasury bond yield, a global bond interest rate benchmark, soared to 4.98% as of the 19th. It is the highest level in 16 years since July 2007, just before the global financial crisis.
Demand for CP from securities companies also shrunk, adding fuel to the surge in interest rates. Securities companies have been managing customer funds raised through bond wraps and trusts, which are short-term investment products, by investing them in high-risk bonds with inconsistent maturities and long-term CPs with low liquidity. However, they have suffered large-scale losses since the Legoland incident, which triggered a bond market crunch last year. . The explanation is that when the financial authorities judged this to be an unhealthy business and began an investigation in May, securities company wrap and trust operations shrank and demand for CP plummeted.
The financial sector believes that the upward trend in CP interest rates is unlikely to continue. However, there is still a sense of caution that it might lead to a short-term money market crunch. As the economic recovery is delayed, there are also observations that it is difficult to relax tensions as insolvency may become a reality, especially in real estate project financing (PF) businesses.
Reporter Seong Kim
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