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S. Korea's risk premium hits record low on U.S.-China trade deal

Economy 10:41 December 13, 2019

SEOUL, Dec. 13 (Yonhap) -- South Korea's credit default risk has plunged to a record low on reports that U.S. President Donald Trump signed off on a much-awaited trade deal with China, according to Seoul's finance ministry Friday.

The credit default swap (CDS) premium for South Korean foreign exchange stabilization bonds with a five-year maturity came to 25 basis points, marking the lowest on par with the 25-basis points recorded Oct. 29, 2007.

The spread reflects the cost of hedging credit risks on corporate or sovereign debt. A fall implies an improvement in the credit of government bonds and lower costs for issuance. A basis point is 0.01 percentage point.

Bloomberg News reported that Trump signed a phase-one trade deal with China that averted steep tariffs planned by the U.S. against China for Sunday.

"Getting VERY close to a BIG DEAL with China. They want it, and so do we!" Trump said in a Twitter post earlier in the day.

The protracted trade row between the U.S. and China, the two largest trading partners of South Korea, has weighed on Korean exports.

S. Korea's risk premium hits record low on U.S.-China trade deal - 1


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