April 18, 2024

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The headquarters of the Bank of Korea in Seoul (Yonhap)

The money supply in the market has reached a record high, with companies increasingly issuing corporate bonds amid lower interest rates, data released by the Bank of Korea showed on March 19.

The nation’s M2 money supply increased by 41.9 trillion won ($37 billion), or 1.3 percent, to an all-time high of 3,233.4 trillion won in January, according to the BOK.

The 41.9 trillion won increase also marked the largest monthly growth since the central bank began compiling related data in 2001.

M2 is an indicator of the money supply that includes cash, savings deposits, money market securities and mutual funds. M2 is a broader measure of the money supply than M1, which only includes cash and checking deposits.

The M2 money supply grew as companies issued corporate bonds, taking advantage of low interest rates, the central bank explained.

The increased M2 money supply means that businesses secured capital by issuing corporate bonds or taking out loans, and they put money into financial products that can easily be liquidated.

Data compiled by the state watchdog the Financial Supervisory Service showed that corporate bonds issued in the first month of this year stood at 13.56 trillion won, up 28.1 percent month-over-month and 21.5 percent on-year. The annual interest rate for corporate bonds with three-year maturity dropped from 2.2 percent late last year to between 2 percent and 2.1 percent this year.

“Amid the coronavirus pandemic, small and medium-sized companies have increasingly taken out corporate loans while corporates with financial stability also tried to secure cash,” an official from the nation’s central bank said.

By Kim Young-won (wone0102@heraldcorp.com)