South Korea's bond issuance rose 8 percent in May from a month earlier due mainly to increased debt sales by the central bank and policy lenders, the bourse operator said Tuesday.

   Bond issuance by the country's government, public institutions and companies reached 56.04 trillion won (US$51.9 billion) last month, up 4.15 trillion won from April, according to the Korea Exchange (KRX). The total amount of bonds issued in 2011 stood at 242.23 trillion won as of May, it added.

   The rise was attributed to increased bond issuances by the Bank of Korea (BOK) and state-run lenders, such as the Export-Import Bank of Korea and the Industrial Bank of Korea, said the KRX.

   Monetary stabilization bonds issued by the BOK came to 23.8 trillion won, up 30.3 percent from the previous month. Policy lenders' issuance of financial bonds surged 44 percent to 5.32 trillion won.

   In contrast, corporate debt sales slumped 18.8 percent to 6.95 trillion won.

   The KRX, meanwhile, noted that dollar-denominated bond issuance plunged 71.8 percent to 0.54 trillion won, due mainly to tightened regulations on "kimchi bonds."

   Kimchi bonds refer to foreign currency debt issued by local and foreign companies in South Korea. Excessive sales of kimchi bonds have been blamed as the main reason for rising short-term foreign debt, putting upward pressure on the local currency.

   In April, South Korean financial authorities inspected four banks -- one local and three foreign banks -- over currency forwards and their handling of kimchi bonds amid a surge in short-term overseas debt, which is feared to hurt market stability.

   In a bid to curb the country's growing short-term debt, the government announced last month that it will lower the ceiling of foreign exchange derivatives positions held by local and foreign banks by 20 percent.

Source: Yonhap News (June 7, 2011)