Government Bonds for Individual Investors: Sharp Increase in Long-Term Yields... Are There Any Side Effects?

Total Investors Reach 42,000, with Over 6,600 Investing More Than 100 Million Won (15.8%)
January Issuance Proceeds Smoothly Following Interest Rate Hike

The government has announced plans to expand the issuance of government bonds for individual investors, which were introduced to help individuals build long-term assets, and to implement measures to boost demand such as increasing additional interest rates. However, concerns have been raised regarding the efficiency of fiscal management due to increased interest costs, as well as the potential crowding-out effect caused by competition with private financial products.

According to the report "Status and Revitalization Measures of Government Bonds for Individual Investors" released by the National Assembly Budget Office on February 2, 2026, the total issuance of government bonds for individual investors in 2025 was 1.2057 trillion won, an increase of about 500 billion won compared to the previous year, but it still fell short of the annual issuance target by about 100 billion won.

Government bonds for individual investors are a type of savings bond that only individuals can purchase. The principal and interest are guaranteed by the state, and if held to maturity, investors benefit from additional interest rates, compound interest, and the advantage of separate taxation on interest income (taxed separately at 15.4% without being included in the comprehensive income tax base). The government fully implemented this system in 2024 to broaden the demand base for government bonds and support the public in building long-term assets. From June 2024 to January 2026, the cumulative number of investors reached 42,103, with 6,633 individuals investing more than 100 million won, accounting for 15.8% of the total.

By product, the five-year bonds performed relatively well, while the ten-year and twenty-year bonds, which require longer holding periods, continued to see under-subscription. In response, the government has expanded the annual issuance target for government bonds for individual investors to around 2 trillion won this year. The additional interest rate for ten-year bonds has been significantly increased from around 0.5 percentage points to 1 percentage point, and for twenty-year bonds from around 0.67-0.7 percentage points to 1.25 percentage points. As a result, the bonds issued in January 2026 reached their issuance limits across all maturities, showing signs of recovering demand.

To further ease maturity burdens, the government will introduce a new three-year bond in April 2026. Additionally, starting in the second half of this year, it plans to allow investments in ten-year and twenty-year bonds through retirement pension (DC and IRP) accounts, whereas currently, purchases are limited to accounts at designated sales agencies.

Yoo Minho, the analyst at the National Assembly Budget Office who authored the report, pointed out that introducing a three-year bond could undermine the system's purpose of "extending the maturity structure of government bonds," and that excessively increasing the additional interest rates could both raise the government's interest burden and cause a crowding-out effect by drawing market funds into government bonds.

Analyst Yoo stated, "Government bonds for individual investors are essentially a type of government debt that must be repaid with taxpayers' money, so the efficiency of funding costs should be the top priority. Rather than simply increasing the issuance volume, it is necessary to establish transparent principles for calculating additional interest rates that are consistent with market rates and to operate the system stably so that it can become a sustainable program."