Ministry of Strategy and Finance of Republic o : Foreign Exchange Stabilization Bonds worth US $1 Billion Sold

Foreign Exchange Stabilization Bonds

worth US $1 Billion Sold

The Korean government successfully sold US $1 billion worth of 10-year government-issued dollar-denominated bonds to strong global demand on January 12, 2017.

Issuance Details

This was Korea's first dollar-denominated bond sale since the country's AA sovereign credit rating upgraded in the second half of last year.

The bonds were sold at 55 basis points over comparable US treasuries.

Amount	US $1.0 billion
Maturity	2027 (10 years)
Yield	2.871% (10 year US treasury + 0.55%)
Coupon rate	2.75%

Sales Evaluation

The 2.871 percent yield is the lowest yield ever for government-issued dollar-denominated bonds. Also, the rate is low compared to equivalents issued by countries with similar credit ratings: One basis point lower than Ontario savings bond[1] yield and JBIC bond[2] yields. Strong global demand, which amounted to US $3.0 billion, lowered the spread to a record level of 55 basis points

Global investors from Asia, Europe, the US and other regions showed avid interest in the bonds as a total of about 70 financial institutions participated in the bidding.

10 Year Dollar Bond Sales

(US $ billion, %, bp)

	1998	May 2003	Sept 2004	Dec 2006	April 2009	Sept 2013
Amount	3.0	1.0	1.0	0.5	1.5	1.0
Yield (%)	9.083	4.306	4.965	5.178	7.260	4.023
Spread (bp)	355	92	85	69.6	437.5	115

Expected Outcome

The sales is expected to contribute to lowering external debt costs for the private sector as well as state-owned financial institutions and public enterprises by providing a lower benchmark yield rate, and to stabilizing CDS premiums by increasing FX stabilization bonds in the market.

[1]Issued by the province of Ontario

[2]Issued by Japan Bank for International Cooperation, to which the government provides guarantees