Strong Performance in National Credit Rating for Han, $1.5 Billion Foreign Currency Bonds Issuance in Second Half

[Sejong=Asia Economy Reporter Kwon Haeyoung] The government plans to issue foreign currency-denominated bonds worth up to $1.5 billion in the United States, Europe, and other regions around September.

According to the financial sector on the 25th, the Ministry of Economy and Finance recently completed preliminary procedures such as selecting underwriters for the issuance of Foreign Exchange Stabilization Fund Bonds (Oe-pyeong-chae). If they succeed in issuing Oe-pyeong-chae at a low interest rate by leveraging the momentum from favorable national credit ratings by the three major international credit rating agencies, it is intended to confirm and further strengthen overseas investors' trust in the Korean economy.

Recently, the international credit rating agency Fitch maintained South Korea's national credit rating at AA- with a 'stable' outlook. Earlier, in April and May, Standard & Poor's (S&P) and Moody's also maintained South Korea's national credit rating and outlook.

The three major credit rating agencies did not downgrade South Korea's credit rating or outlook even last year when it was hit hard by COVID-19. Compared to the fact that credit ratings or outlooks of 113 countries worldwide were downgraded after the COVID-19 outbreak, this is considered quite significant.

Among the Group of Seven (G7) countries, six countries except Germany have seen their national credit ratings (United Kingdom, Canada, Italy) or outlooks (United States, France, Japan) downgraded since the COVID-19 outbreak.

The government views the current confirmation of the three major international credit rating agencies' positive views on the Korean economy as the right time to issue Oe-pyeong-chae. They intend to use the issuance of Oe-pyeong-chae as a stepping stone to further strengthen the "Korea Premium." Recently, the credit default swap (CDS) premium on Korean government bonds is at its lowest level (18 basis points) since the 2008 global financial crisis.

An official from the Ministry of Economy and Finance stated, "The improvement in national credit ratings and external credibility indicators leads to better conditions for overseas financing in the private sector." This means it helps domestic companies and financial institutions raise funds overseas at lower costs.

Last year, South Korea issued Oe-pyeong-chae worth $1.45 billion at historically low interest rates.