Jugeum Gong, Successfully Issues Overseas Bonds with the Lowest Negative Interest Rate in History

-0.075% Interest Euro Covered Bond Issuance
Borrower's Annual Interest Burden Reduced by 15.24 Billion KRW for 5 Years

[Asia Economy Reporter Kwangho Lee] The Financial Services Commission announced that the Korea Housing Finance Corporation successfully issued euro-denominated covered bonds on the 24th (Korean time) with the lowest ever interest rate (-0.075%) and the largest scale (1 billion euros).

The issuance interest rate of this covered bond was determined by adding a credit spread (0.18%) based on creditworthiness to the benchmark rate, the Euro Mid Swap (-0.255%).

The credit spread reflecting creditworthiness is the lowest ever among euro-denominated Korean bonds, and the total issuance interest rate was the second lowest negative rate (5-year maturity) in Korean bonds, following Bank A's covered bond (-0.17%).

Accordingly, KHFC will receive 1,003.76 million euros (KRW 136.2 trillion) and use the funds for products such as the Bogeumjari Loan without paying interest for five years, then repay only 1 billion euros (KRW 135.7 trillion).

Through this issuance, KHFC raised funds necessary for policy mortgages at an interest rate 1.12 percentage points lower than general mortgage-backed securities (MBS).

As a result, the interest burden for users of policy mortgages such as the Bogeumjari Loan will decrease by KRW 15.24 trillion annually (total KRW 76.2 trillion) over five years.

A Financial Services Commission official stated, "Through this issuance by KHFC, we will continue to promote the reduction of housing costs for low-income households without homes by utilizing funds raised at low interest rates," adding, "We also plan to continue efforts to discover overseas investors by using KHFC's overseas offices (such as Singapore, scheduled to open by the end of this year)."