Major banks and public companies are rushing to tap the overseas market to raise capital following the fall in borrowing costs. It is expected they will raise $2 billion overseas this year. But bankers warn that the rush to tap foreign funds will raise borrowing costs again.

“The issuance of $1 billion in currency stabilization bonds at the lowest-ever interest rate of 4.25 percent on May 29 has become the benchmark for local banks to issue their own bonds,” Rhee Yeung-kyun, director general of International Department at the Bank of Korea, said.

“Back in March, due to the North Korean nuclear crisis and the accounting fraud scandal at SK Global, the risk premium on foreign denominated stabilization bonds was high, making it difficult to bring in loans from overseas,” he said.

“But as market conditions stabilized, the spread on the nation’s currency stabilization bonds declined to an all-time low, which improved borrowing conditions,” he said.

The Korea Development Bank plans to issue $550 million in five-year bonds in Japan today, while the National Agricultural Cooperatives Federation is holding investor relations sessions in Hong Kong, London and Paris for issuing $300 million in five-year Eurobonds this week.

Other banks, such as Woori and KorAm, also intend to bring in foreign loans worth more than $100 million each.

As to concerns that this sudden rush of bond issuance in a short period could hike interest rates again, Rhee believed banks will not become too competitive in issuing bonds.

“If local banks engage in excessive competition to bring in foreign loans, the interest rate could go back up, but I expect them to take sufficient time in bringing in foreign loans,” he said.

In addition to banks, several state-run companies are also issuing bonds. The Korea Highway Corp. plans to hold a series of road shows in the United States, Europe and Asia next week. Southeast Power Co. intends to issue 10-year bonds worth $150-200 million abroad.