Issuance of corporate bonds… January’s market volume increased by 42 trillion won, the highest ever

The amount of money released on the market in January recorded the largest increase in history. This is because companies started to secure liquidity earlier this year by accelerating the issuance of corporate bonds in order to take advantage of the low interest rate stance. In addition, there was an impact on the liquidity of the household sector as the demand for living funds and housing funds increased.

According to the’Currency and Liquidity in January 2021′ announced by the Bank of Korea on the 18th, the broader currency (M2) in January was 323.34 trillion won. 1.3% (41.8 trillion won) increased from the previous year. The increase is the highest ever since statistics were compiled in 2001.

M2 is the sum of short-term financial products such as money market funds (MMF) and deposits and savings for less than two years, in addition to cash, demand deposits, occasional deposits and withdrawals (above M1). It is a money that can be converted into cash immediately and is a standard for grasping the flow of money circulating in the market.

It is companies that have driven the increase in the amount of money on the market. M2 in the corporate sector increased by 24 trillion won in one month, reaching a record high. An increase of 10.1% from a year ago. It is the highest level in 11 years and 3 months since October 2009 (10.5%). This is the effect that companies secured funds with bond-type and stock-type beneficiary certificates and regular deposits and installments of less than two years to secure liquidity. It means that they raised cash by offering stocks or issuing corporate bonds.

In particular, from the beginning of this year, when interest rates are low, it is interpreted that companies have accelerated the issuance of corporate bonds to secure a’live’. According to the Financial Supervisory Service’s “Business Direct Financing Procurement Performance in January”, the corporate bond issuance performance in January was 13,5605 billion won, an increase of 28.1% from the previous year. It increased by 21.5% from a year ago. Of these, general corporate bonds (4.52 trillion won) increased 330.9% from the previous year.

A BOK official explained, “In the aftermath of Corona 19, loans to SMEs increased, and companies with good financing conditions began securing funds through public offerings or issuing corporate bonds, which led to a marked increase in corporate M2.”

The reason why companies started to secure liquidity can be interpreted as the impact of the spread of the novel Corona 19. It is possible that some small and medium-sized enterprises need funds because they could not escape from the recession caused by Corona 19.

On the contrary, there is a possibility that companies have started securing investment funds due to anticipation for an economic recovery, such as the corona 19 vaccination. This is because the domestic vaccination began on the 26th of last month, raising expectations for an economic recovery. In addition, export prices are on the rise as exports are on the rise due to the recovery of the international economy.

M2 in the household and non-profit organization sector also increased by 4.4 trillion won in one month. The increase from the previous month decreased from last year’s October (18.38 trillion won), November (9.1 trillion won), and December (9 trillion won), but it is still high.

A BOK official said, “As at the end of last year, household loans to secure living funds increased due to the aftermath of Corona 19, and the increase in the amount of money in the market is still at a high level as demand for housing funds such as home sales and jeonse continues to increase ”Analyzed.

Reporter Yoon Sang-eon [email protected]