The borrowing rate in commercial papers in the South Korean money market fails to come down and hovers at a five-year high despite heavy liquidity fueling by the government and central bank, blunting their operation to prevent liquidity crunch for the Korean Inc. due to coronavirus jitters.

According to the Korea Financial Investment Association (KOFIA), the 91-day CP of an A1 rated category yielded 2.23 percent by Thursday midday, the highest since March 3 in 2015.

The overnight policy rate is currently at 0.75 percent.

The yield had been at 1.36 percent on March 17, a day after the Bank of Korea had made an emergency rate cut by half a percentage point to 0.75 percent.

The 91-day certificate of deposit (CD) (AAA rating on par with the sovereign debt) yielded 1.10 percent Thursday, widening the spread between the two to 1.11 percentage points, the largest since January 28 in 2009 in the aftermath of the late 2008 Wall Street meltdown.

Market analysts expected that the spread to widen for a while as credit card servicers and capital companies require immediate funds to survive the plunge in demand.

Yuanta Securities estimates 47.7 trillion won ($38.5 billion) worth bonds by secondary financial institutions and companies mature by September.

Han Gwang-ryeol from NH Investment Securities said cash flows in the airline, hotel and travel industry could fall to a third of last year’s level. He added that companies who saw their longer-dated offerings undersubscribed in institutional sale in March are rush towards the short-term debt market.

Authorities keeping close watch on the debt market will be pumping in liquidity and the short-dated money market remains stable as the papers are mostly issues by big investment-grade companies, said Kim Sang-man from Hana Financial Investment.

By Jin Young-tae, Ahn Gap-seong and Choi Mira

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]