KIS Weekly 337 ENG Weekly 337_ENG.pdfwon), LG Telecom 67 (140 billion won), Taeyoung Construction 43 (100 billion won), and maturing amounts totaled 320 billion won from SK Energy

KIS Weekly

KIS Pricing Inc.

Rate changes in bond indices 2 KTB & MSB Market Overview 3 Bank Bonds and Other Fin. Debentures 6 Corporate Bond Market Overview 8

Swap Market Overview

13

ELS Market Overview 15

This document is for our clients only. Other than disclosures relating to KIS Pricing, it is based on credible information, but we do not

represent it is accurate or complete, and it should not be relied on as such. Therefore, we are not liable to any investment activities

that are based on this document. More information is available at bond.co.kr and our investment portfolio management tool, KIS-Net.

Kyle Huh (02-3215-1477), Sohyoung Park (02-3215-1458) No. 337, 7th Sept., 2009

2 No. 337, 7th September, 2009

KIS

Weekly

Rate Changes in Bond Indices

Spot Curve by bond type Swap Spread between KTB

Hankyung-KIS-Reuters, KOBI30, KOBI120 (Call reinvest index)

Market value weighted average YTM by type Bond Index Duration

1.50

2.50

3.50

4.50

5.50

6.50

7.50

8.50

0 2 4 6 8 10

KTBKEPCO

KDBCorp(AA-)

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

07-03 07-17 07-31 08-14 08-28-40

-35

-30

-25

-20

-15

-10

-5

0

KTB 3yrSwap 3yr Spread

145

150

155

160

165

170

175

07-03 07-17 07-31 08-14 08-28

All KTB MSB

Corp KOBI30 KOBI120

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

6.00

07-03 07-17 07-31 08-14 08-28

All KTB

MSB Corp

KOBI30 KOBI120 0.70

1.20

1.70

2.20

2.70

3.20

3.70

4.20

07-05 07-19 08-02 08-16 08-30

All KTBMSB CorpKOBI30 KOBI120


KIS

Weekly

KTB & MSB Market Overview

■ KTB & MSB l Last week, yield on 3yr and 5yr KTBs dropped by 5bps to 4.30% and 9bps to

4.79%, respectively. That on 10yr also edged down by 9bps to 5.35%.

l Last week, the spread between 3yr and 5yr KTBs tightened to 49bps but that

between 5yr and 10yr remained at 56bps.

l Industrial Production Index in July was 0.7% higher than a year ago, showing

positive sign for first time in ten months. However, consumer price index in

August also 2.2% higher than a year ago, which affected the KTB market

somewhat negatively.

l Foreign investors’ buying up of KTB Futures, coupled with the U.S. Treasury

down, helped the strong KTB market despite some recovery signs of local

economic indicators.

l Last week, yield on 1yr MSB closed the week down by 5bps to 3.44% and that

on 2yr also declined by 2bps to 4.31%.

l With CD rates unchanged through the week, foreign investors’ picking up of

1yr MSBs led the bull market. Showing especially bearish mood for 1yr MSBs,

the spread between 1yr and 2yr MSBs closed the week narrowly up to 87bps,

which conspicuously compared to 112bps for last July.

[Fig.1] Change in yield by bond type

2

2.5

3

3.5

4

4.5

5

5.5

20090102 20090217 20090331 20090514 20090625 20090806

KTB 1yr KTB 2yr KTB 3yr

KTB 5yr KTB 10yr


KIS

Weekly

[Fig.2] Change in yield by bond type

2

2.25

2.5

2.75

3

3.25

3.5

3.75

4

4.25

4.5

20090102 20090217 20090331 20090514 20090625 20090806

MSB 1yr MSB 2yr

[Fig.3] KTB SPREAD

20

30

40

50

60

70

80

90

100

110

120

20090102

20090123

20090217

20090310

20090331

20090421

20090514

20090604

20090625

20090716

20090806

20090827

(bp)5_3 SPREAD 10_5 SPREAD

[Fig.4] 3yr Credit SPREAD

50

55

60

65

70

75

80

85

90

95

100

20090629

20090713

20090727

20090810

20090824

SPECIAL BANK COPORATE


KIS

Weekly

[Fig.5] 5yr Credit SPREAD

40

50

60

70

80

90

100

110

120

20090629

20090713

20090727

20090810

20090824

SPECIAL BANK COPORATE

[Fig.6] KTB / MSB Trade Amt

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

3M 6M 1Y 2Y 3Y 5Y Over 5Y

(Mil)

KTB MSB Special

[Fig.7] Foreign Exchange Rate

1200

1250

1300

1350

1400

1450

1500

1550

1600

1650

20090102

20090116

20090203

20090217

20090303

20090317

20090331

20090414

20090428

20090514

20090528

20090611

20090625

20090709

20090723

20090806

20090820

20090903

JPY USD


KIS

Weekly

Bank Bonds and Other Financial Debentures

■ Bank

Bonds &

Others

l Yields on bank bonds showed no significant movement through the week

and remained fluctuating in the current level.

l Bank bonds spread, which significantly rose at the beginning of the week,

showed somewhat better stability and seemed to lose momentum to

rebound.

l 1yr and 2yr bank bonds spread rose by 6bps to 45bps and 9bps to 47bps,

respectively. 3yr spread also increased by 3bps to 82bps.

l Last week, local banks sold about 2.8 trillion won worth of bank debt,

which was mostly by KDB, IBK, Nonghyup, and Suhyup. Hana bank also

actively sold its bank debt from the previous week.

l In contrast to bank bonds, yields on other financial debentures

significantly dropped and exhibited the bull market. Especially, strong

demand for the AA0 rated, other financial debentures maturing around

1.5yrs led the downward trend.

l 1yr and 2yr other financial debentures spread dropped by 6bps to 107bps

and 7bps to 118bps, respectively. 3yr spread also declinded by 1bp to

150bps.

l With new issuance of other financial debentures totaling 440billion won,

the A0 rated debentures especially were leaning towards lower yields.

Change in Bank Bond AAA yield

2.563

3.473.88

4.314.74

4.935.14

5.445.75

2.56

3.023.48

4.32

4.78 4.935.12

5.415.7

3.89

1.41.7

22.32.62.93.23.53.84.14.44.7

55.35.65.96.26.5

3M 6M 9M 1Y 1.5Y 2Y 2.5Y 3Y 4Y 5Y Maturity

YTM(%)

2009-08-282009-09-04


KIS

Weekly

Change in Bank Bond AAA Credit Spread

0

30

60

90

120

150

180

210

240

270

300

330

360

390

08-10 08-12 09-02 09-04 09-06 09-08

Bank AAA 1yr - MSB 1yr,bpBank AAA 3yr - MSB 3yr,bp

Change in Credit Spread of Other Financial Debentures AA0

0306090

120150180210240270300330360390420450480510540

08-10 08-12 09-02 09-04 09-06 09-08

Other Fin. Debentures AA 1yr - MSB 1y r,bp

Other Fin. Debentures AA 3yr - KTB 3yr,bp


KIS

Weekly

Corporate Bond Market Overview

■ Primary

Market

The corporate bond market last week experienced a growth of 470 billion won,

with a total issuance amount of 790 billion won from Kia Motors 276-1 & 276-

2 (200 billion won), Shinsegae 119 (200 billion won), Komipo 14 (150 billion

won), LG Telecom 67 (140 billion won), Taeyoung Construction 43 (100 billion

won), and maturing amounts totaled 320 billion won from SK Energy 3 (150

billion won), SK Energy 10-2 (70 billion won ), Sungshin 141 (50 billion won),

Daewoo Motor Sales 30 (30 billion won).

For the upcoming week, new issues on schedule are LG Powercom 16-1 & 16-

2 (100 billion won), Asiana Airlines 61 (100 billion won), Samhwan 123 (70

billion won), Dongbu Steel 151-1 & 151-2 (50 billion won), GS Retail 29 (50

billion won), totaling 370 billion won. Maturing issues on schedule are Yukor

Car Carriers 1 (90 billion won), Dongbu Steel 127 (40 billion won), Hanwha

Resort 11 (30 billion won), totaling 160 billion won, leading to a net growth of

210 billion won.

[Figure 1] Corporate Bonds Issued and Matured (unit: 100m won)


KIS

Weekly

■ Secondary

Market

The corporate bond market last week didn’t exhibit any particular directional

momentum. The market was slightly leaning towards growth, with lower yields,

but with limited change. Total trading was at 1,255 billion won. A0 and AAA

rating corporate bonds traded at 298.9 billion won (23.8%) and 270 billion won

(21.5%), respectively. In addition, Hynix and Kumho Petrochemical (BBB rating

corporate) traded actively, covering 13.1% of the market at 164.7 billion won.

Specifically, among AAA rating corporate bonds, KB Financial Holdings,

Shinhan Financial Holding, Hana Financial Holdings, POSCO, KT, and Komipo

were active. In addition, among AA rating bonds, GS Caltex, SK, SK Energy,

Samchully, Woori Investment Securities, Kia Motors, Samsung Corporation, LG

Powercom, Korea Investment Holdings were active. Among A rated bonds, CJ

Homeshopping, SK Networks, Hite Beer, Korean Air, Hanjin Heavy Industries,

Hanwha Petrochemical, Hanjin Shipping, Hyundai Hysco were active. Total

trading (excluding new issuances) increased by 3.7% to 1,255 billion won, and

based on credit rat ing, A rating bonds covered 38.35, AA rating bonds covered

26.9% of the market. Corporate bonds under 1 year covered 30.5% of the

market, and those between 1~3 years represented 66.6% of the market.

[Figure 2] Corproate Bonds Trading (unit: 100m won)


KIS

Weekly

[Figure 3] Trading Activity Trend & Maturity-wise Weights (unit:%)

■Corporate

Bond Yields&

Spreads

With the Open Market Committee upcoming in September, corporate bond

yields maintained within its range without particular material events. However,

bond yields were on a downhill mainly due to the drop in US treasury yields.

Early in the week, industrial production indices, market leading indicators, and

other economic indicators performed well, causing a weak start for the bond

market, but the drop in US yields pull domestic bond yields back down. In

addition, foreign investors expanded their positions in KTB futures, further

adding momentum to the drop in yields.

As of the 4th, AAA 3-year corporate bond yields dropped by 2 bps to 5.08%,

which is a 3 bp increase to 78 bps above KTB, A corporate dropped 9 bps to

6.03%, which is a 4 bp drop against the KTB at 173 bps.

[Figure 4] AAA 3yr Credit Spread Trend (unit:%)


KIS

Weekly

[Figure 5]Weekly Average Yields (unit:%)

■Credit

Rating

Change

Credit rating of Ssamzie dropped from BB- to B+, and Excon dropped from B-

to CCC. For Ssamzie, the drop was due to the weakening of its fashion

accessory business and increase in uncertainty from the change in its majority

shareholder, in addition to financial uncertainty.

■Convertible

Bond Market

Due to the drop in stock indices from the change in fiscal policy (contraction) of

the Chinese government, the Korean market also started off the week falling

below 1,600 points. The index reached 1,623.06 points, the yearly high level,

during the week, but the volatility of the market soon ended up dropping the

Kospi index back to 1,608.9 points, which is a 0.96 point increase from the

previous week, and the Kosdaq dropped 1.37 points to 518.82 points.

For the previous week, Schnell Korea 6 BW, Tomboy 44 CB, and Inocell 3 CB

were issued. There were no conversion price refixings, and Estech Pharma 3

CB and Insprit 2 CB were converted.


KIS

Weekly

[Figure 7] Weekly Stock Market (unit:%)

■ Convertible

Bonds Trading

Significant convertible bond trading last week were as follows: KIA Motors

275BW (23.95 billion won), LG Innotek 22CB (7.02 billion won), LG Innotek

23BW (6.82 billion won), Kumho Industries 252BW (2.44 billion won), Kumho

Tire 10BW (1.9 billion won), Taihan Electric Wire 146BW (7.64 billion won),

Woongjin Holdings 39BW (3.96 billion won).

Parity levels of ITM bonds (those over 1.2) averaged 1.902, a small drop from

1.92 in the previous week.

[Figure 8] Junk Bonds Parity Trend (unit:%)

0

0.5

1

1.5

2

2.5

3

20080901 20081016 20081128 20090114 20090302 20090414 20090529 20090713 200908250

0.2

0.4

0.6

0.8

1

1.2

ITM(Left)ATM(right)

OTM(right)

*ITM(Parity above 1.2, ATM: Parity 0.8~1.2, OTM: Parity Below 0.8)

700

900

1100

1300

1500

1700

1900

20080901 20081127 20090227 20090527 20090820

KOSPI

08/28: 1607.9409/04: 1608.90

100

200

300

400

500

600

700

20080901 20081127 20090227 20090527 20090820

KOSDAQ

08/28: 520.1909/04: 518.82


KIS

Weekly

Swap Market Overview

Major Interest Rates and Weekly Changes

Major Interest Rates Weekly Changes

-1.70%

-0.70%

0.30%

1.30%

2.30%

3.30%

4.30%

5.30%

6.30%

7.30%

USD TB 3Y USDIRS 3YKRW CRS 3Y KRWIRS 3YKTB 3Y

-0.05% -0.04%

0.05%

-0.15% -0.14%-0.20%

0.00%

0.20%KTBKRW IRSKRW CRSUSD IRSUSD TB

KRW CRS Curve Trend KRW IRS Curve Trend

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

03M 09M 02Y 04Y 06Y 08Y 10Y

200812312009082820090904

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

03M 09M 02Y 04Y 06Y 08Y 10Y

200812312009082820090904

IRS Spread Trend and Weekly Changes

IRS Spread Trend Weekly Changes

-0.40%

-0.30%

-0.20%

-0.10%

0.00%

0.10%

0.20%

0.30% KRWIRS 5Y-3Y

KRWIRS 10Y-5Y

0.01%

0.00%0.00%

0.00%

0.00%

0.01%

0.01%

0.01%

0.01%KRWIRS 5Y-3YKRWIRS 10Y-5Y


KIS

Weekly

Swap Basis Trend and Weekly Changes

Swap Basis Trend Weekly Changes

-6.50%

-5.50%

-4.50%

-3.50%

-2.50%

-1.50%

-0.50%

0.50%SWAP BASIS(1Y)SWAP BASIS(3Y)

-0.04%

0.09%

-0.10%

0.00%

0.10%SWAP BASIS(1Y)SWAP BASIS(3Y)

Bond/IRS Trend Weekly Changes

-1.20%

-0.70%

-0.20%

0.30%

0.80%SWAP SPREAD(1Y)SWAP SPREAD(3Y)

-0.05%

0.01%

-0.20%

0.00%

0.20%

SWAP SPREAD(1Y)SWAP SPREAD(3Y)

Major Yields Spread (unit: %)

Rates 2008/12/31 2009/08/28 2009/09/04 Weekly Change Yearly Change

US TREASURY 3y 0.90 1.56 1.41 -0.14 0.51

US IRS 3y 1.69 2.05 1.90 -0.15 0.21

KRW CRS 3y 2.00 2.85 2.90 0.05 0.90

KRW IRS 3y 3.29 4.20 4.16 -0.04 0.87

KTB 3y 3.40 4.35 4.30 -0.05 0.90

IRS 5-3y 0.08 0.18 0.19 0.01 0.11

Swap Basis 3y -1.29 -1.35 -1.26 0.09 0.03

Bond/IRS 3y -0.11 -0.15 -0.14 0.01 -0.03


KIS

Weekly

ELS Market Overview

■ Stock

Market

The stock market early in the week, started off with a steep surge, but finished

the week with a small gain. The index reached new yearly high levels (1,620

range) during trading hours, but the upward trend was limited. As foreign

investors increased program trades (sell orders), the market dropped to 1,610

range again. The market was affected by the US market’s 4 day straight drop.

■ ELS

Primary

Market

There was a decrease in ELS issuances. This week, public issues decreased to

51 new issues and private issues decreased to 78 issues, totaling 129 new

issues. Total issuance amount of public issues totaled 144.11 billion won, and

private issues totaled 260.35 billion won. [Figure 1] KOSPI200 & HSCEI Trend for the Past 1 Year

■ Weekly

Issuance

Type

Out of the 129 new issues, 69.7%, or 90 issues, were Step Down Hi-Five types,

and there were 31 option types, 8 miscellaneous types.

Documents

KIS Weekly 337 ENG Weekly 337_ENG.pdfwon), LG Telecom 67 (140 billion won), Taeyoung Construction 43 (100 billion won), and maturing amounts totaled 320 billion won from SK Energy