2024-04-28 10:07:09
Registered04/28/2024 7:07 p.m.
Edit04/28/2024 7:07 p.m.
surfaceAT 5
From the Savings Bank and Saemaeul Geumgo
Purchase of a total of 400 billion won of non-performing loans
“This even increases demand for private corporate bonds. »
The theory of the role of the Korea Asset Management Corporation (CAMCO) is quickly emerging. This is due to growing concerns over the insolvency of real estate project financing (FP) regarding secondary financial institutions such as savings banks and Saemaeul Geumgo. However, since Camco also does not have sufficient financial resources, it seems to be barely holding on by issuing bonds. In a situation where interest rates remain high, it is highlighted that the bond and short-term fund markets might freeze if government bonds with excellent credit ratings flood into the market.
According to the financial sector, on the 28th, KAMCO is continuing a plan to purchase 400 billion won of non-performing loans, or 200 billion won each, from savings banks and Saemaeul Geumgo. This is to alleviate growing anxiety as delinquency rates at savings banks and Saemaeul Geumgo soar.
The problem is that KAMCO is also suffering financial difficulties. Indeed, most financial resources were exhausted during the operation of the New Start Fund, a debt adjustment program for small business owners and the self-employed. According to the Korea Securities Depository, KAMCO issued public bonds worth 800 billion won in the first quarter of this year. Last year, 40.5% of the annual amount of public bond issues was carried out in a single quarter. This is equivalent to the annual amount of emissions in 2021 (KRW 1 trillion) and 2022 (KRW 1.11 trillion). The market expects KAMCO to further increase the amount of its public bond issuance following the second quarter.
KAMCO is not alone in experiencing the increase in public bond issuance linked to the PF crisis. The Housing and Urban Guarantee Corporation (HUG) also amended its statutes this year to prepare the groundwork for issuing public bonds. Previously, direct issuance of bonds was not possible, but now it is possible to directly issue public bonds. The HUG also offers various support measures in the restructuring process for a soft landing of the FP real estate sector. The total volume of maturing government bonds will increase from 2-3 trillion won per month in the first quarter to 4-5 trillion won in the second quarter. There is concern in the market that public bonds might lead to a “crowding out effect” that would suck out demand for corporate bonds from private companies. When companies such as KAMCO with ultra-high credit ratings (AAA) issue bonds, the interest rate of government bonds will increase, which may gradually affect the financing of banks and general businesses. In late 2022, when the Legoland incident occurred, KEPCO bonds were blamed for the market’s funding crisis. Currently there is a lot of liquidity in the bond market, so it is analyzed that there are no major problems at the moment. Geopolitical risks originating in the Middle East and rising interest rates due to prolonged inflation are considered variable. The interest rate on 10-year U.S. government bonds rose from 3.8% at the start of the year to 4.6% on the 26th. A financial industry official expressed concern: “If the burden of supply and demand increases due to the expansion of KAMKO bond issuance during a period of rising interest rates, the bond market might be shocked. »
Reporter Seo Hyeong-kyo [email protected]
1714318107
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