April 27, 2024
Stocks & Bonds
South Korea’s risk premium hits 18-month high on North Korea woes
[THE INVESTOR] South Korea’s credit default risk has hit an 18-month high amid saber-rattling between the US and North Korea over the latter’s weapons program, data showed on Aug. 16.
The credit default swap (CDS) premium for South Korean foreign exchange stabilization bonds with a five-year maturity reached 70 basis points as of Aug. 14, the highest level since 71 basis points on Feb. 25, 2016, according to the data by the Korea Center for International Finance.
The CDS premium jumped 13 basis points over a one-week period and was higher than 68 basis points for China. As of the end of last year, the figure came to 44 basis points for South Korea, compared with 119 basis points for the world’s second-largest economy.
The spread mirrors the cost of hedging credit risks on corporate or sovereign debt. A rise implies a deterioration in the credit of government bonds and higher costs for issuance. A basis point is 0.01 percentage point.
The jump in South Korea’s CDS premium comes amid a bitter verbal war between the US and North Korea over Pyongyang’s nuclear and missile programs.
By Alex Lee and newswires (alexlee@heraldcorp.com)
The credit default swap (CDS) premium for South Korean foreign exchange stabilization bonds with a five-year maturity reached 70 basis points as of Aug. 14, the highest level since 71 basis points on Feb. 25, 2016, according to the data by the Korea Center for International Finance.
The CDS premium jumped 13 basis points over a one-week period and was higher than 68 basis points for China. As of the end of last year, the figure came to 44 basis points for South Korea, compared with 119 basis points for the world’s second-largest economy.
The spread mirrors the cost of hedging credit risks on corporate or sovereign debt. A rise implies a deterioration in the credit of government bonds and higher costs for issuance. A basis point is 0.01 percentage point.
The jump in South Korea’s CDS premium comes amid a bitter verbal war between the US and North Korea over Pyongyang’s nuclear and missile programs.
By Alex Lee and newswires (alexlee@heraldcorp.com)
