PRESS RELEASE
June 4, 2012
OTC Bond Market Remains Strong with a Rising Global Preference
for Safe Assets
KOFIA has released the Monthly OTC Bond Market Review for May 2012.
The Korea Financial Investment Association (KOFIA) released on June 4, 2012 its Monthly
Over-the-Counter (OTC) Bond Market Review for May 2012.
A. [Interest Rates] As favorable conditions for the bond market persist, such as external
uncertainties sparked by Greece and the global trend to avoid risky assets, the OTC bond
market continues its upward trend in May despite the pressure on interest rates.
 Safe assets are increasingly being favored, owing to mounting external uncertainties
such as the potential Greek exit from the Eurozone, concerns about a possible Spanish
bank run, and the stagnant US employment index.
 In the generally bullish market, increasing short-term bond buying backed by rising
MMF balances, along with credit bonds with higher interest rates, showed relatively
strong performance.
3-Year Korea Treasury Bond (KTB) Rates
<Unit: %>
Monthly Interest Rate Changes
<Unit: bps>
B. [Bond Distribution] Trading volume grew 18% MoM to KRW 512tn.
 Trading volume increased with market participants actively making transactions, as the
tide in the market turned in a bullish direction despite limited volatility.
 Foreign buyers' net purchases of OTC bonds totaled KRW 1.9tn, up KRW 0.6tn MoM.
* The net purchase value does not match the statistics (net investment) provided by the
FSC, since the former is based on the trade dates rather than settlement dates and does
not include redemption at maturity. (Same applies to below.)
[Trading Volume by Investor Type]
(Unit: KRW 100mn, %)
Type
May 2011
Apr 2012
May 2012
Proportion to
Total
MoM
YoY
Securities Co
2,663,272
2,680,688
3,160,820
61.8
480,132
497,548
Bank
795,423
643,396
842,883
16.5
199,487
47,460
Asset Manager
592,408
518,457
518,569
10.1
112
-73,839
Insurance Co
240,652
222,027
261,648
5.1
39,621
20,996
Pension & Fund
114,870
79,427
94,902
1.9
15,475
-9,968
Foreign Investor
National &
Local Gov’t
Others
62,461
48,926
105,613
2.1
56,687
43,152
64,371
39,553
47,342
0.9
7,789
-17,029
123,877
101,724
86,191
1.7
-15,533
-37,686
Daily Avg
232,867
216,710
243,713
-
27,003
10,846
Total
4,657,334
4,334,198
5,117,968
100.0
783,770
460,634
C. [Bond Issuance] The overall issuance of OTC products fell 2% MoM (KRW 1tn) mainly
due to declining issuance in government and corporate bonds (KRW 48.9tn → KRW
47.7tn).
 The issuance volume of corporate bonds (excluding ABS) dropped to KRW 3.3tn
compared to the previous month. (KRW 6.4tn → KRW 3.3tn)
Corporate Bond Issuance
<Unit: KRW 1tn; ABS excluded>
Corporate Bond Issuance
By Credit Rating
<Unit: KRW 1bn; ABS excluded>
Mr. Sang-ki Cha, Manager of the Fixed Income Department at KOFIA, said, “In May, the
OTC bond market remained strong as investors tended to avoid risky assets amid persisting
external uncertainties out of Greece and Spain.”