This article appeared in "Signal," the capital market compass, at 13:13 on August 2, 2026.
Kyobo Securities (030610) successfully underwrote bonds issued by the Busan Metropolitan City and the Incheon Metropolitan City in succession last month. Amid continued uncertainty in the bond market, the firm secured the bids at spreads similar to those of government-guaranteed bonds, demonstrating its competitiveness, observers said.
According to the investment banking (IB) industry on the 2nd, Kyobo Securities supported an 800 billion won municipal bond issuance conducted by the Busan Metropolitan City on the 14th of last month. The five-year bond was priced at 31 basis points (1bp=0.01 percentage point) above the five-year government bond yield. On the 31st of last month, Kyobo Securities also completed the process of fully underwriting 122.2 billion won of three-year municipal bonds issued by the Incheon Metropolitan City. The bonds were awarded at 27.5 basis points above the three-year government bond yield.
The market took note that the bonds were issued at competitive yields despite continued uncertainty in the bond market. According to the Korea Financial Investment Association, the three-year and five-year government bond yields stood at 3.831% and 4.078%, respectively, as of the 31st of last month. It was the first time in three years, since 2023, that the five-year government bond yield exceeded 4%. This is interpreted as the effect of the base rate hike materializing amid a prolonged conflict between the United States and Iran.
While most local governments pursuing bond issuances had to bear high costs, the premium that Busan and Incheon had to pay was relatively low. Considering that government-guaranteed bond spreads have recently formed around 30 basis points, both Busan and Incheon effectively completed their fundraising at par levels.
This has led to an interpretation that the bond market benefited from the flip side as volatility in the stock market intensified. As the surge in bond yields earlier this year was attributed to a "money move" toward the stock market, the explanation goes that bond investment sentiment is recovering as enthusiasm for stock investment eases. "Since volatility in the stock market has risen to extreme levels from the last week of July, government bond and municipal bond bids have also shown strength compared with the first half of the year," an IB industry official said.
Analysts said that Kyobo Securities' aggressive sales strategy, which led the full underwriting of municipal bonds, also played a role. This year, Kyobo Securities fully underwrote three municipal bonds previously issued by Busan, recording 180 billion won in underwriting performance. The firm also has a track record of steadily underwriting municipal bonds issued by Incheon. Incheon, which issued municipal bonds twice this year, appointed Heungkuk Securities early in the year but is believed to have re-entrusted Kyobo Securities based on this track record.
