Korean Development Bank may tighten on stake sale, Nomura says

The yield on bonds of the Korean Development Bank (KDB) may tighten against rivals, after local press reports suggested the Korean government may soon start selling its stake in the lender, analysts at Nomura say.

Any stake sale will likely be accompanied by an explicit government guarantee for KDB's foreign currency bonds, Nomura says, leading to a 10-15 basis point yield pick up against rivals such as Kexim and IBK, which lack an explicit guarantee.

With Korean bank shares trading below book value, and a busy political calendar for this year, the sale may come in 2013 rather in than the coming months, says Nomura analyst William Mak. Still, Korean policy bank bonds remain a better bet than their commercial rivals, he says.