On October 23, the government successfully issued foreign exchange stabilization fund bonds (hereafter “FX Bonds”) totaling approximately USD 1.7 billion (USD 1 billion and JPY 110 billion).  

The issuance comprised USD-denominated bonds with a 5-year maturity totaling USD 1 billion and JPY-denominated bonds with maturities of 2-year, 3-year, 5.25-year, and 10 year totaling JPY 110 billion (equivalent to approximately USD 700 million).

The issuance of these FX Bonds carries the following significance:

First, the 5-year USD-denominated FX Bonds set a new record for the lowest spread (+17bp over U.S. Treasuries), while the JPY-denominated FX Bonds were issued at low interest rates in the 1% range with a lower spread than the previous JPY bond issuance in 2023.

Since the spread reflects investors’ assessment of the issuer (the Korean government), setting a historically low spread indicates that the market’s evaluation of Korea’s recent economic conditions

and policy direction has improved. Moreover, the fact that the FX Bonds were issued with a spread in the 10bp range for the first time compared with U.S. Treasuries, widely regarded as the world’s safest asset, demonstrates the further maturation of Korea’s economic fundamentals. At the same time, compared with bonds issued by other major countries’ institutions, the low spreads of Korea’s FX Bonds underscore their competitiveness and confirm the strong external credibility of the Korean economy in the eyes of the international community.

Second, the issuance significantly contributed to expanding Korea’s FX reserves, which play a crucial role in responding to heightened external uncertainties. Following the first-half issuance of EUR 1.4 billion, the latest issuance brings the total amount of FX Bonds issued this year to USD 3.4 billion. This represents the largest annual issuance since 1998, when USD 4 billion was issued.

In particular, this issuance was made possible based on the National Assembly’s approval to increase the foreign-currency FX Bond issuance ceiling from USD 1.2 billion to USD 3.5 billion through the supplementary budget enacted in May. It serves as an example of how the National Assembly and the government have responded in a coordinated manner to changing domestic and external conditions.

In addition, the proceeds from this issuance also proactively secured the funds needed to repay FX Bonds maturing in November this year – specifically, the USD 400 million FX Bonds issued in 2005.

Third, following the issuance of Euro-denominated FX Bonds in the first half of the year, the government successfully issued FX Bonds denominated in U.S. dollars and Japanese yen, achieving issuance in all three of the world’s major reserve currencies – the G3 currencies – within a single year for the first time. This demonstrates strong demand for Korea’s FX Bonds across all three major financial markets and also signifies a diversification of the currency composition of FX reserves.

Fourth, as foreign currency funding for domestic companies and financial institutions is generally conducted in G3 currencies, and issuance conditions such as interest rates are typically benchmarked against government FX Bonds denominated in the same currencies, this year’s successful issuance of G3 currencies-denominated FX Bonds is expected to contribute to the overall improvement of domestic foreign currency funding conditions.

Furthermore, following the USD-denominated FX Bonds issued in 2024 and the Euro-denominated FX Bonds issued in the first half of this year, the government successfully issued this round of bonds using the Sovereign, Supranational, and Agency (SSA) issuance framework, a method commonly employed for advanced bond issuance. This has further strengthened the status of Korea’s FX Bonds as high-quality bonds in the global bond market.

Prior to this FX Bond issuance, the government organized several events to raise global investor awareness of Korea’s FX Bonds and attract investment. These included the Invest KOREA Summit held in New York in September, attended by senior executives from major global financial institutions, an in-person roadshow in Tokyo in October, and a global investor conference call. During these events, the government actively presented the new administration’s policy directions, the recent strong performance of the Korean stock market, the inclusion in the World Government Bond Index (WGBI), highlighting the attractiveness of Korea’s capital markets and the ongoing economic recovery.

Please refer to the attached files.