This article appeared on the capital market compass "Signal" at 3:53 p.m. on July 2, 2026.
Korea's corporate bond market shrank in the first half of this year, weighed down by high interest rates stemming from the Middle East. KB Securities, regarded as a "powerhouse in the debt capital market (DCM)," maintained its reputation by ranking first in both corporate bond underwriting and acquisition, but posted weaker results than a year earlier.
According to the Korea Financial Investment Association on Thursday, corporate bond issuance in the first half of this year totaled 67.2659 trillion won, down 10.26% from 74.9574 trillion won in the same period a year earlier. Redemptions, meanwhile, rose to 63.6323 trillion won from 55.2251 trillion won over the same period. The shift is attributed to the fallout from the war between the United States and Iran this year, which pushed the yield on three-year AA-rated corporate bonds up to the 4.5% range, prompting companies to repay debt with cash on hand rather than refinance.
Looking only at the second quarter, however, corporate bond issuance edged up from a year earlier. Analysts say companies rushed to complete their fundraising amid concerns that the central bank might raise its base rate as high oil prices, driven by geopolitical tensions in the Middle East, put upward pressure on inflation. "There was an atmosphere of issuing corporate bonds to lower funding costs even slightly, on expectations that rates could rise further from current levels," an official in the investment banking (IB) industry said.
The outlook for the second half is also challenging. With the Bank of Korea increasingly likely to raise its base rate, supply pressures are expected to continue amid rising issuance of both short- and long-term bonds. "The July Monetary Policy Board meeting will be the starting point of a rate-hike cycle rather than a resolution of uncertainty," said Kim Chan-hee, a researcher at Shinhan Investment & Securities. "With upward revisions to growth forecasts from the semiconductor trickle-down effect coinciding with an imminent rate hike, weakness is projected across the corporate bond market."
Investor sentiment toward bonds is also cooling sharply. Following JR Global REIT in the first half of this year, the fallout from corporate rehabilitation and workout filings by JoongAng Group affiliates has heightened caution toward lower-rated bonds. "For lower-rated companies, there had been a supply-demand advantage in which individual investment demand increased based on high interest rates during periods of rising rates," said Kim Sang-man, a researcher at Hana Securities.
