Seoul, Aug 28 (IANS): Corporate bond sales in South Korea dropped last month as concerns over an early exit of US quantitative easing raised market rates and worsened borrowing conditions, data showed Wednesday.

Combined debt financing, including sales of corporate bonds, bank debentures and asset-backed securities (ABS), plunged 35.1 percent from a month earlier to 6.36 trillion won ($5.7 billion) in July, Xinhua reported citing Financial Supervisory Service.

US Federal Reserve Chairman Ben Bernanke's comments on the tapering of bond purchases lifted government bond yields above the three percent mark, aggravating conditions for issuing corporate bonds, the watchdog said.

Corporate bond sales, or those issued by industrial companies, sank 19.2 percent month-on-month to 1.75 trillion won in July. Bonds issued by financial firms declined 9.9 percent with ABS and bank debenture sales tumbling 61.7 percent and 48.3 percent each.

Bipolarisation in the debt-financing market lasted, raising worries about liquidity crunch among small, low-credit companies. There was no debt issuance by small firms last month, and bonds floated by companies with a credit rating of "A" or above accounted for around 90 percent of the total.