HF Issues Straight MBS for the First Time

- Expected to lower the MBS rate and enables stable funding by removing call-option uncertainties.

Korea Housing Finance Corporation(HF, CEO Choi Joon Woo) announced on September 17 that it issues Straight MBS for the first time since its establishment. 

Previously, MBS issued by HF included tranches of more than 5-year maturity embedded with a call option, which is the right of issuer(HF) to make prepayment to the buyer(investor) before maturity. However, all of the tranches of the MBS issued this time are under bullet payment term, without a call-option. 

 *(Conventional MBS) Consists of nine tranches with maturities spanned over 1 year to 30 years. Call option is embedded to tranches with longer than 5 years of maturity.

  (Straight MBS) Consists of four tranches with 1,2,3,and 5 years of maturity. Bullet Payment only. 

The Straight MBS issued this time comes with one, two, three, and five years of maturity, with total worth of est. KRW540B.  Despite the recent increase of government bond yield, the final issuance rate of the MBS is 1.875%, which is 0.161%p lower than the 2.036% of the yield of MBS issued on Sept 3.

HF commented, “The lower yield was possible as the maturities were shortened catering to the investors’ demand and as the uncertainties of call-option was removed. HF will continue to expand investor-base by diversifying issuance structure.”