South Korea's credit default risk has hit a yearly low amid rising hope for reconciliation between the two Koreas after Seoul and Pyongyang successfully held a summit last month, data showed Satuday.

The credit default swap premium for South Korean foreign exchange stabilization bonds with a five-year maturity reached 42 basis points as of Friday, according to the data by the Korea Center for International Finance.

It is the first time the figure has reached 42 basis points since Jan. 11, which was the yearly low at the time.

The figure stood at 76 basis points in September last year following the North's sixth nuclear test.

The number mirrors the cost of hedging credit risks on corporate or soverign debt. A rise implies deterioration in the credit of government bonds and higher costs for issuance. A basis point is 0.01 percentage point. (Yonhap)