Saneun Issues 200 Billion KRW KOFR-Based Floating Rate Bonds

On the 2nd, the Korea Development Bank announced that it has completed the first issuance of variable rate bonds linked to the Korea Overnight Financing Repo Rate (KOFR).

The size of this bond issuance is 200 billion KRW with a maturity of 3 months, issued by adding 8 basis points (1bp=0.01%) to the compounded average of the 1-day KOFR.

KOFR is the interest rate calculated using 1-day repurchase agreements (RP) collateralized by government bonds and monetary stabilization securities. In line with the global trend of adopting transaction-based rates rather than quote-based rates as standard rates, KOFR was designated as an important financial transaction benchmark under the Financial Transaction Indicators Act in 2021 in Korea.

Since the launch of the Market Participants Group under the Benchmark Rate Improvement Task Force led by the Financial Services Commission and the Bank of Korea in 2019, the Korea Development Bank has participated in the Benchmark Rate and Short-term Financial Market Council and the KOFR Activation Working Group, promoting the issuance of KOFR-linked variable rate bonds to establish KOFR in the spot market as a policy financial institution.

The Korea Development Bank stated, “Through this issuance, the KOFR variable rate bond agreement, first established by the Korea Development Bank domestically, is expected to enhance understanding of the KOFR interest calculation method and serve as a market trading standard in the future.” It added, “We will continue to issue KOFR-based variable rate bonds to play a benchmark role in the KOFR-based bond market, which is still in its early stages.”