HF held its first round of Relief Loans MBS bidding
- Date 2015-05-08
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HF held its first round of Relief Loans MBS bidding
- The smooth completion of the bidding for long-maturity MBSs would ease concerns in the market-
Korea Housing Finance Corporation (HF, CEO Kim Jae-Chun) announced on the 8th that its first round of Relief
Loans MBS bidding has been completed without any market disturbance. The bidding was carried out as part
of its scheme to securitize 34 trillion won in the Relief Loans.
Among some 3.6 trillion won of the first batch of MBSs to be issued on May 12, 2015 (Tuesday), 1.170 trillion won
of MBSs with a maturity of 10 years or more were put up for the bidding, and a total of 870 billion won of long
maturity MBSs were channeled into the market.
By maturity, 420 billion won of 15-year maturity MBSs and 140 billion won of 20-year maturity MBSs, which are
available at attractive interest rates, were all sold off, and nearly half (310 billion won) of the 610 billion won of
10-year maturity MBSs were auctioned off.
Despite the huge volume (more than 1 trillion won) of long-term MBSs put up for sale at this bidding, a strong buying
position continued throughout the bidding process, largely led by insurers, pension funds, and other institutional investors
that prefer long-term bonds. For the 20-year maturity MBSs, bidding reached two times the value of the initial bidding price,
indicating that, overall, the first round of Relief Loans MBS bidding was carried out smoothly.
It has been agreed in advance between HF and the banks that offer Relief Loans that the banks take over Relief
Loans MBSs. Long-term Relief Loans MBSs were put up for auction at this bidding in order to provide investment
opportunities for ordinary investors. According to the agreement, the loan-offering banks are to take over the long-term
MBSs left unsold and purchase the MBSs that were turned over to general investors through the bidding.
At the same time, HF will support the smooth issuance of Relief Loans MBSs by avoiding the issuance of other MBSs
during the period when it issues Relief Loans MBSs and setting its MBS issuance date after considering the issuance
schedule of the nation's 10-year treasury bonds.
The second round of MBS bidding will be held on May 21, 2015 (Thursday) for MBSs with a maturity of 10 years or more,
and 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 official stated, “The first round of bidding has been completed smoothly, driven by the robust buying demand by
long-term institutional investors, and we hope that this will help ease market concerns over the potential burden caused by
the volume of the bidding.” He also added, “HF will also work to revitalize the secondary market through stronger disclosure
for investors in the future.”