Korea Housing Finance Corporation (KHFC) on July 10 successfully sold 4.9 trillion won in mortgage-backed securities (MBS) across eight maturities, marking its first full sale after a prolonged period of partial failures. The successful issuance followed easing volatility in Korea's bond market, where the USD/KRW exchange rate stabilized around the 1,500 level and equity market fluctuations subsided. KHFC had faced repeated partial sale failures in recent months due to weakened investor sentiment across the credit market, making this complete sale a significant turnaround for the public housing finance entity.
KHFC Sells 4.9 Trillion Won MBS Across Eight Maturities
According to investment banking industry sources on July 10, KHFC received bids exceeding the offering amount for all maturities in its 4.9 trillion won general-type MBS issuance. The breakdown by maturity: 1-year 30 billion won (government bond +31bp), 2-year 120 billion won (+30bp), 3-year 130 billion won (+33bp), 5-year 50 billion won (+37bp), 7-year 30 billion won (+60bp), 10-year 50 billion won (+65bp), 20-year 50 billion won (+58bp), and 30-year 30 billion won (+65bp). All spreads were set substantially below the initial ceiling levels. KHFC had originally proposed ceiling spreads of 49bp for 1-year, 42bp for 2-year, 43bp for 3-year, 44bp for 5-year, 67bp for 7-year, 75bp for 10-year, 89bp for 20-year, and 89bp for 30-year notes.
Bid Demand Reaches 288% of Issuance Volume
Total bid demand approached three times the issuance size, with the overall bid-to-cover ratio reaching 288%—the highest level for KHFC MBS since November last year. Specific demand by maturity: 160 billion won for 1-year, 320 billion won for 2-year, 280 billion won for 3-year, 110 billion won for 5-year, 80 billion won for 7-year, 120 billion won for 10-year, 230 billion won for 20-year, and 110 billion won for 30-year notes. The robust demand enabled KHFC to price all maturities at spreads considerably tighter than the proposed ceilings.
KHFC Resumes 30-Year MBS Issuance After May 22 Hiatus
The July 10 issuance marked the resumption of 30-year MBS offerings, which KHFC had suspended since May 22—a hiatus of approximately one and a half months. The 30-year tranche attracted 110 billion won in bids against the 30 billion won offering, securing demand above the issuance amount. Long-dated securities require targeting specific institutional demand segments, making market sensitivity particularly acute for these maturities. The successful 30-year sale signals renewed appetite for longer-duration KHFC paper.
Other Public Entities Complete Bond Offerings on July 10
Beyond KHFC's MBS sale, other public entities conducted successful bond offerings on July 10. KHFC separately issued 70 billion won in 1.5-year notes at 3.90%, while Korea Student Aid Foundation raised 70 billion won in 5-year bonds at 4.24%. Based on the day prior to issuance, KHFC priced 1.6bp below the equivalent-maturity private placement average, and the Student Aid Foundation priced 2.7bp below the equivalent-maturity government-guaranteed bond private placement average.
Market Participants Cite Stabilizing Conditions
A bond market official stated, "With the dollar-won exchange rate stabilizing in the early 1,500 range and the stock market also showing some signs of calming, securing demand in the credit issuance market has become somewhat easier than before. However, it is still difficult to say that demand is abundant." The official's comments reflect the gradual normalization of investor sentiment following a period of heightened volatility that had constrained credit market activity and contributed to KHFC's prior partial sale failures.
FAQ
What did Korea Housing Finance Corporation do on July 10?
Korea Housing Finance Corporation on July 10 sold 4.9 trillion won in mortgage-backed securities across eight maturities (1-year to 30-year), achieving full placement after a period of repeated partial sale failures. The overall bid-to-cover ratio reached 288%, the highest since November last year.
Why is the resumption of 30-year MBS issuance significant?
KHFC resumed 30-year MBS offerings on July 10 after suspending them since May 22. Long-dated securities require targeting specific institutional demand segments, making market sensitivity particularly acute. The 30-year tranche received 110 billion won in bids for a 30 billion won offering, indicating renewed investor appetite for longer-duration KHFC paper amid stabilizing market conditions.
