Regulation of Bond Market in South Korea

Abstract

Corporate bonds account for nearly 80% of total long term debt financing by corporates in the four developed economies of USA, Germany, Japan and South Korea. This assignment talks about working of bond markets in South Korea. Special public bonds, such as those issued by the Korea National Housing Corp and municipal bonds, form part of the central government bond market. Corporate bonds include special public bonds issued by state-owned entities; financial debentures other than those issued by KDB; and other corporate issues, which may be guaranteed or non-guaranteed. Most corporate bonds are non-guaranteed with three-year maturities. Debt instruments include issues from both the government and corporate sectors. A repurchase agreement (repo) market was established in 2002. The short selling of bonds is allowed in the Republic of Korea, provided it is backed by a guarantee. Futures and options contracts were also formed in 1999 and 2002, respectively.