SEOUL: Korea Development Bank (KDB) jumped back into the G3 bond markets on Wednesday with a $750 million 144a deal that was timed to take advantage of what could turn out to be a short-lived market window.
While renewed momentum across the Chinese stock markets has a created a positive backdrop, the looming US Federal Reserve policy meeting over the course of September 16 and 17 has the potential to send the emerging markets back into a tailspin even though few market participants believe it will raise rates.
Over the past two days, the iTraxx Korea Index has come in 3bp to 65/70, a slightly less impressive performance than other Asian sovereigns. Nevertheless, it gave KDB the confidence to return to the international bond market for its first major benchmark deal since May. After building up an order book around the $2.1billion mark, the bank settled for a 10-year transaction at 99.857% on a 3.375% coupon, to yield 115bp over Treasuries.
A total of 167 accounts participated of which 73% came from Asia, 17% from the US and 10% from EMEA. By investor type insurers and pension funds took 56%, fund managers 21%, banks 11%, sovereign wealth funds and agencies 10% and private banks 2%.
Final pricing was 20bp inside initial guidance of 135bp over Treasuries, which was then revised to 115bp to 120bp over. The nearest comparable was its outstanding 3.75% January 2024 bond, which was trading at 99bp over Treasuries on Wednesday.
Fixed-income analysts said the deal priced a couple of basis points wide of fair value. This is fairly typical of the Aa3/A+/AA- rated credit, which always tries to set an aggressive benchmark no matter how accommodating market conditions are.
Kexim’s outstanding 2.875% January 2025 bond was trading Wednesday at 105bp over Treasuries. With the curve worth about 3bp, this suggests that KDB has priced about 8bp wide of Kexim. Its rival’s most recent benchmark deal was a $1 billion deal this May, which has a December 2020 maturity.
