HF Issues Social CB with 7 Years of Maturity for the First Time in Korea

- Boosted by the government’s issuance of FX equalization bond with the record low spread.

  - Sets to make public mortgages more affordable for the low-to-moderate income households.

Korea Housing Finance Corporation(HF, CEO Choi Joon Woo) announced on October 21 that it issues social covered bonds* worth of Euro 550M, with the record long maturity of seven years, at the 0.258% issuance rate, which reflects 0.19% spread on the Euro-mid swap rate of 0.068%.  The covered bond issuance of 7 years of maturity is first of its kind among domestic institutions.   

  * The covered bonds of HF have high credibility and redemption stability as they provide the investors with preferential repayment right on the mortgage-backed bonds, which are offered as collateral at the time of the bond issuance. 

HF explained it succeeded in issuing the bonds with the record long maturity, despite the recent increased market volatility with the end of quantitative easing of many central banks and inflation pressure. It added the recent government issuance of foreign exchange equalization bond(5-year maturity) with the record low spread of 13bp affected favorably on the CB issuance.   

With the bond issuance, HF has paved the way for; expanding the investor base, diversifying maturities, and securing a long-term funding source. In addition, the issuance of the long-term bond is expected to; lower distribution rate of the 5-year maturity bonds, attract commercial banks to the covered bond market, and make public mortgages such as Bogeumjari Loans more affordable for low-to-moderate income first-time homebuyers.

HF CEO Choi commented, “With the issuance of covered bonds of 7-year maturity, HF further strengthened its public role in promoting the covered bond market. Given the funding cost with overseas covered bonds is less than domestics ones by about 1%p, we are exploring measures to expand the size of overseas covered bond issuance.” 

In the meantime, covered bonds, with the dual recourse feature, are regarded as a safe asset, as proved in its issuance market resilience even in the aftermath of 2008 financial crisis.