Amid an Upward Interest Rate Cycle
The National Pension Service (NPS), whose annual corporate bond investment amounts to 40 trillion won, is reducing the investment this year. Especially, its corporate bond purchase has been zero since the Russian invasion of Ukraine on Feb. 24.
The most recent demand forecasting in which the NPS participated was on Feb. 21, when it ordered 40 billion won of three-year Lotte Chemical bonds with a rating of AA+ and received half.
The participation of the NPS was approximately 970 billion won in January and February this year, whereas the amount was 3.95 trillion won in the same months of 2021, 430 billion won in March 2021 and 220 billion won in March 2020.
“The NPS substantially reduced its corporate bond investment in January and February with interest rates rising, and it is likely to keep doing so for the time being as interest rates will continue to rise,” said an industry source, adding, “Although it is understandable that it is focusing on long-term government bonds as safer assets, it is also pointed out that the biggest institutional investor needs to be more responsible.”
At the end of 2021, the domestic bond investment of the NPS was approximately 340 trillion won, including 39 trillion won in corporate bonds. With the NPS keeping its distance from the corporate bond market, more and more major pension funds and the other institutional investors are also reducing their investments.