On July 8, the government successfully issued EUR 1.7 billion (approximately USD 1.94 billion) in Foreign Exchange Equalization Fund Bonds (EUR FX Fund Bonds).

The government issued the bonds in a dual-tranche offering, consisting of EUR 700 million in three-year bonds and EUR 1 billion in seven-year bonds.

¹⁾ Issuance rate: the benchmark rate for the same currency and maturity plus a spread.

²⁾ Coupon rate: the interest rate paid to bondholders.

³⁾ EUR Mid-Swap: the midpoint of bid and offer rates for euro interest rate swaps (IRS), used as the benchmark rate for euro-denominated bond issuance.

This issuance carries the following implications:

First, the government set a new benchmark for Korean euro-denominated bonds by issuing a record EUR 1.7 billion in EUR FX Fund Bonds. In particular, the seven-year tranche was the largest-ever single tranche, surpassing the previous record of EUR 750 million set in 2014. By establishing a solid benchmark in the euro market – one of the world’s two major funding currencies alongside the U.S. dollar – the government has further strengthened the foundation for Korean issuers to raise foreign-currency funding under more stable conditions.

Second, both the three-year and seven-year tranches achieved the lowest-ever spreads for their respective maturities. Following February’s successful USD FX Fund Bond issuance, the government likewise achieved new record-low spreads in the euro market, pricing the three-year and seven-year tranches at 15bp and 24bp below the previous record lows established in 2025 (3-year: +25bp; 7-year: +52bp), respectively. Notably, the spreads were at or below those of outstanding bonds with comparable maturities issued by major advanced economies, international organizations, and highly rated public-sector issuers, further reaffirming the international financial market’s strong confidence in the Korean economy. As the spreads on FX Fund Bonds serve as a benchmark for overseas funding by Korean issuers, the tighter spreads achieved in this issuance are expected to reduce foreign-currency funding costs across the broader Korean market.

Third, the issuance confirmed robust demand for the FX Fund Bonds despite challenging market conditions, including heightened external uncertainty stemming from renewed tensions in the Middle East. Ahead of the issuance, the government actively presented Korea’s growth strategy to leading global institutional investors, highlighting its AI transformation initiative aimed at making Korea one of the world’s top three AI powers (AI G3), the competitiveness of its advanced manufacturing sector, and capital market advancement. As a result, the bonds were priced at spreads 4bp tighter than the initial price guidance for both tranches. In addition, by successfully issuing the bonds under the SSA^* format for the third consecutive year, the government further strengthened its standing as a leading sovereign issuer while broadening its base of high-quality investors.

^* SSA (Sovereigns, Supranationals and Agencies): A category of high-quality institutional investors in the global bond market, including sovereign governments, central banks, sovereign wealth funds, supranational organizations, and policy financial institutions.

Fourth, the issuance proactively secured additional foreign-currency resources to support Korea's external soundness. In particular, by securing funding for the redemption of the EUR 700 million euro-denominated FX Fund Bonds maturing this October more than three months in advance of their maturity, the government has ensured stable external payment capacity without refinancing pressure. The foreign-currency assets raised through this issuance will serve as a strong buffer against unexpected changes in external conditions, helping the Korean economy respond resiliently to external shocks.

With this issuance, the government has successfully completed its 2026 FX Fund Bond issuance program totaling the equivalent of USD 5 billion – the largest annual issuance of foreign-currency FX Fund Bonds on record. Successful placements in both the U.S. dollar and euro bond markets at record-low spreads underscored global investors’ strong confidence in Korean credit. The government will continue to closely monitor developments in international financial markets, maintain a stable foreign-currency funding base, and steadfastly support the external soundness of the Korean economy.

Please refer to the attached files.