Korea's corporate bond market is heading toward a near-standstill at the start of 2025, as persistently high interest rates dampen investor sentiment and discourage companies from raising funds during what is traditionally the busiest season for issuance.
Only three companies have confirmed plans to issue corporate bonds in January, according to investment banking sources on Monday. Hanwha Aerospace (012450.KS), rated AA0, POSCO Future M (003670.KS), rated AA-, and Samyang Corp. (145990.KS), rated AA-, plan to issue bonds around mid-January. Hanwha Aerospace and POSCO Future M will each raise 250 billion won, while Samyang Corp. will seek 150 billion won. Lotte Wellfood is also reportedly considering a bond issuance.
January is typically the peak season for corporate bond issuance in Korea. In the first week of January this year (January 6-10), eight companies conducted demand forecasting for bond issuances. In the second week (January 13-17), 19 companies tapped the market. The number of issuers in early-to-mid January next year would represent less than a quarter of the same period this year.
"To issue corporate bonds at the start of the year, lead managers typically hold kickoff meetings in mid-December to finalize issuance terms," an investment banking official said.
High interest rates are the primary reason for the market's near-dormant state. As rates have surged well above 3.5% amid market uncertainty, companies face significantly higher funding costs. The yield on AA- rated three-year corporate bonds reached 3.598% as of December 11, marking a yearly high. This is the first time the rate has approached 3.6% since September of last year, approximately 15 months ago.
Rising rate volatility has also pushed investors to the sidelines. According to the Korea Financial Investment Association's Bond Market Sentiment Index (BMSI) for January 2026 released Monday, the composite index fell to 99.9, down 3.3 points from 103.2 in the previous month. A reading above 100 indicates rising bond prices and falling yields, while below 100 signals market contraction.
Widening credit spreads—the gap between AA- rated three-year corporate bonds and government bonds—have also weighed on sentiment amid rising market rates, analysts said.
"The typical supply pressure from increased corporate bond issuance at the start of the year, combined with weakening expectations for U.S. rate cuts, has collectively worsened overall bond market sentiment compared to last month," a Korea Financial Investment Association official said.
However, with nearly 30 trillion won worth of corporate bonds maturing in the first quarter of next year, companies will have no choice but to rush to issue bonds once rates stabilize, industry sources said.
Companies with bonds maturing in January include CJ ENM (035760.KS) with 285 billion won, KT (030200.KS) with 240 billion won, Lotte Holdings (004990.KS) with 305 billion won, and HD Hyundai Oilbank with 230 billion won.
SK Group, one of the largest players in the corporate bond market, faces mandatory refinancing as multiple affiliates have bonds coming due. SK Telecom (017670.KS) has 80 billion won in bonds maturing on January 5, SK Geocentric must repay 190 billion won on January 19, and SK Ecoplant must redeem 128 billion won on January 30.
"Companies with maturing bonds have no choice but to issue new bonds, but due to rising rates, there will likely be almost no new corporate bond issuances at the start of the year," another industry official said. "Other companies will only enter the market sequentially if the confirmed issuers achieve strong demand forecasting results."
