Government Issues $1 Billion Eurobonds After 3 Years

Lowest Ever Additional Interest Rate
Diversification of Investor Composition

The government announced on the 27th that it has successfully issued foreign exchange stabilization fund bonds (Oe-pyeong-bond) with a maturity of 5 years and a scale of 1 billion dollars for the first time in 3 years.

The issuance rate was set at 4.576%, which is 24 basis points (1bp = 0.01 percentage point) above the US 5-year Treasury bond yield, and the coupon rate was fixed at 4.5%.

The spread of 24bp is the lowest ever recorded. It is lower than the lowest spread for dollar bonds of the same maturity, 30bp (2019), and the lowest spread for all dollar bonds, 25bp (2021, 10-year bonds), and it is 4bp narrower than the current market trading spread for Oe-pyeong-bonds with the same remaining maturity (maturing in 2029, 28bp).

The Oe-pyeong-bond yield serves as a benchmark when Korean public enterprises or private companies issue bonds. The Ministry of Economy and Finance explained, "With the benchmark significantly lowered, domestic companies and financial institutions now have the opportunity to raise foreign currency at lower interest rates."

The composition of investors has also diversified. The Ministry stated, "The investor base, which was previously concentrated in banks and asset management companies, has expanded and reorganized to include high-quality SSA investors, and the previously minimal proportion of American investors has greatly increased, providing an opportunity for the government to establish diversified foreign currency capital raising channels in the future."

The government places significance on achieving the lowest-ever spread and diversifying investor composition amid prolonged uncertainties in the international financial market, such as differentiated monetary policies among major countries and instability in the Middle East.

The Ministry of Economy and Finance said, "Taking this issuance as an opportunity, we will introduce to global investors the government's active efforts to enhance accessibility for foreign investors, including capital market advancement and foreign exchange market structural improvements."