이 기사는 2021년 11월 10일 08시08분 thebell에 표출된 기사입니다

Tension is mounting in the Korean paper market after the U.S. Federal Reserve's decision to start tapering or gradual winding down in the massive bond purchase program that it had carried out to support the economy.

Last week, the Federal Open Market Committee (FOMC) announced the start of balance sheet tapering at a pace of $15 billion per month - $10 billion of Treasuries and $5 billion of mortgage-backed securities - in November and December.

The Fed’s tapering plan is expected to have an impact on the Korean paper market, which has enjoyed a boom until the first half of this year thanks to ample liquidity. All issuers of Korean paper, which refers to foreign currency-denominated securities sold abroad by Korean entities, have been met with strong demand for the past 15 months, with many of them selling bonds at record-low rates.

The Fed’s tapering could weaken investor sentiment. It is said that the market rate of dollar-denominated bonds issued by foreign issuers has risen after the Fed's tapering announcement.

“With the start of tapering, institutional investors would not accept low-yield bonds as before,” said an industry source. “Korean issuers have sold their bonds at a negative new issue premium, but (investors) will now demand a higher new issue premium.”

Most of the Korean paper issuers have already raised funds in the first half amid worries over heightened volatility in the second half. However, they are unlikely to enjoy a boom as much in 2022 as they did this year given that a reduction of liquidity is inevitable.

Market participants are paying attention to whether tapering represents a teeing up of future rate hikes. Although Fed Chair Jerome Powell said the tapering decision does not imply anything about raising the federal funds rate, major global investment banks are putting weight on the scenario of rate hike in 2022.

The Fed’s rate hikes next year would increase the volatility of the primary market. Issuers are mulling over the timing of their bond issues before the market gets volatile given that major investment banks expect the Fed to start rate hikes in June 2022.

“Uncertainties surrounding Fed rate hikes will grow toward the second half of next year,” said an industry source. “Korean paper issuers will likely to sell their bonds in early next year to avoid adverse market conditions.” (Reporting by Hye-rim Pi)