Market Summary

Size and Composition

The Republic of Korea’s local currency (LCY) bond market grew 1.5% quarter-on-quarter (q-o-q) to KRW2,841.9 trillion (USD2,388.4 billion) at the end of December, largely driven by growth in the corporate bond segment. Total LCY corporate bonds outstanding rose 2.4% q-o-q to KRW1,659.3 trillion as corporate bond issuance surged during the quarter. Meanwhile, government bonds outstanding posted minimal growth of 0.2% q-o-q to KRW1,182.6 trillion as the rise in the stock of central government bonds was offset by the decline in central bank bonds. On a year-on-year basis, the Republic of Korea’s LCY bonds outstanding expanded 7.9%.

Notable Corporate Bond Issuance

Issuance of corporate bonds in the Republic of Korea surged 42.5% q-o-q to KRW171.8 trillion in the fourth quarter of 2021 from KRW120.6 trillion in the previous quarter. Banks and financial institutions dominated the issuance of corporate bonds during the quarter, led by the Industrial Bank of Korea and Shinhan Bank. 

Policy and Regulatory Developments

On 21 February, the National Assembly passed the first 2022 supplementary budget worth KRW16.9 trillion, which was KRW3.3 trillion more than the original proposal. The supplementary budget is expected to provide support for small businesses and vulnerable groups, and fund disease control measures. This will bring the 2022 total budget to KRW624.3 trillion, resulting in a revised fiscal-deficit-to-GDP ratio of 3.3% versus 2.5% in the original 2022 budget.