New Relief Conversion Loans MBS Put Up for the 1st Round of Bidding

HF completed the bidding successfully, selling off all 10- and 15-year maturity MBSs 

Korea Housing Finance Corporation (HF, CEO Lee Jung-Hwan) announced on the 20th that it smoothly completed its first round of MBS bidding. As part of its plan to securitize KRW20 trillion of MBSs secured by New Relief Conversion Loans for low and moderate income groups, HF held the first bidding. 

Among some KRW 2 trillion of the first batch of MBSs to be issued on December 24, 2019 (Tuesday), KRW 410 billion of MBSs with a maturity of 10 years or more were put up for the bidding that day. Of that volume, KRW 290 billion of long-term MBSs were channeled into the market. And the remaining KRW 120 billion of MBSs will be taken over by commercial banks that offer the loan. 

Despite the prevailing “wait-and-see” mood in the bond market as the year draws to a close, the MBSs were purchased eagerly by insurers, pension funds, and other long-term institutional investors encouraged by the buoyant MBS bidding environment thanks to favorable interest rates in recent months.

It has been agreed in advance between HF and the loan-offering banks that the banks take over New Relief Conversion Loans MBSs. However, long-term MBSs were put up for auction at this bidding in order to ease the banks’ burden and provide investment opportunities for ordinary investors. Accordingly, the banks are to take over the long-term MBSs left unsold. 

The second round of MBS bidding will be held in January 2020 for MBSs with a maturity of 10 years or more. The volume of MBSs to be put up for sale by maturity will be decided after reflecting the nature of their respective underlying assets and be announced at a later time. 

An HF officer stated, “We’ve completed the first round of bidding smoothly even at the end of the year thanks to the robust buying demand by long-term institutional investors. As the demand for long-term securities expands at the beginning of the year largely led by insurers and other institutional investors, we expect the sell-through rate will climb further.”