Corporate direct financing in South Korea surged more than 20 percent from a month earlier in April on a sharp increase in bond issuance. (Image courtesy of Yonhap)
SEOUL, Jan. 9 (Korea Bizwire) — The volume of corporate bonds maturing in the first quarter of 2025 has risen sharply, marking a 27% increase compared to the same period last year. According to Yonhap Infomax on January 9, the total amount of general corporate bonds set to mature this quarter stands at ₩24.92 trillion, up from ₩19.57 trillion in 2024.
Among these, lower-rated corporate bonds (rated A+ or below) account for ₩7.08 trillion. While the first quarter sees a spike in maturing bonds, the amounts due in subsequent quarters are projected to decline, with totals of ₩19.05 trillion in Q2, ₩15.03 trillion in Q3, and ₩8.85 trillion in Q4.
For 2025, the overall maturing corporate bond volume is expected to reach ₩67.86 trillion, a 7.6% decrease from 2024’s ₩73.42 trillion.
Market Dynamics and Investor Outlook
The surge in Q1 maturities is expected to drive an increase in refinancing activities as companies issue new bonds to repay existing ones. Analysts anticipate favorable market conditions supported by the “early-year effect,” with institutional investors actively deploying capital.
The credit spread, the yield difference between government and corporate bonds, is also forecasted to narrow. As of January 8, the spread between three-year government bonds and AA- corporate bonds had already decreased to 67.6 basis points (bps) from 68.8 bps at the end of 2024.
Kim Eun-gi, an analyst at Samsung Securities, highlighted that the appeal of corporate bonds has increased due to last year’s widened credit spreads and expectations of bond purchases ahead of potential interest rate cuts. He projected strong demand for corporate bonds in the first two months of the year, despite increased issuance volumes.
Challenges and Uncertainties
Despite positive market sentiment, several risks loom. Political instability in South Korea, including the ongoing impeachment proceedings, and external factors like the inauguration of Donald Trump’s second administration in the U.S., could impact investor confidence.
Additionally, concerns about real estate project financing (PF) restructuring may pose challenges.
While some analysts, like Lee Kyung-rok of Shin Young Securities, foresee widespread investor interest buoyed by the early-year effect, others remain cautious. Lee Hwa-jin of Hyundai Motor Securities warned that political and economic uncertainties could temper credit investment sentiment.
Similarly, Kim Sang-man of Hana Securities expressed skepticism about the strength and speed of the early-year market rally.
Outlook for Corporate Bonds
Despite these challenges, analysts believe that careful navigation of risks will stabilize the market. Structural support for financially weaker companies and manageable additional provisioning in the secondary financial sector could mitigate concerns over real estate PF restructuring. Analysts recommend a balanced approach, avoiding overly conservative stances.
Ashley Song (ashley@koreabizwire.com)
