South Korean conglomerates with high credit ratings are expected to tap investors’ demand for corporate bonds next month amid the declining yield in benchmark three-year government bond, industry sources said.

Financial industry sources said S-Oil and Samsung C&T, both with credit ratings of “AA+,” will raise 300 billion won ($257 million) in bond sales. Lotte Shopping, with an “AA+” credit rating, is also to raise 250 billion won in debt. GS Caltex, with “AA0,” and CJ Korea Express, with “AA-,” are expected to sell 200 billion won worth of bods each, they said.

The one-year yield of the three-year government bond fell to 1.5 percent on Friday, 0.17 percent point lower than the yield on Jan. 6, seemingly affected by the U.S. Federal Reserve’s decision to keep the rate unchanged last week.

“There should be some demand in investors who have waited until March to check corporate earnings and make investment decisions in the coming month. The overall market response in ‘AA’ corporate bonds will be good,” said Kim Sang-man, a credit analyst at Hana Financial Investment.

“Companies seemed to have waited long enough to expect low credit spreads, which are stagnant now,” he said.

However, companies with single A credits will struggle to sell their bonds, as the corporate bond market is now polarized between “AA group” and “A group” bonds, Kim noted.

For the first time in almost two years, the Korea Aerospace Industries, with a credit rating of “AA-” is expected to sell 200 billion won worth of bonds to raise investment money for the KF-X program.

Samsung C&T, whose credit rating rose to “AA+” after a merger with Cheil Industries, is also to sell bonds with the new grade.

By Kim Yoon-mi (yoonmi@heraldcorp.com)