Government Issues Record EUR 1.7 Billion Forex Stabilization Bonds at All-Time Low Spread

The government has issued euro-denominated Foreign Exchange Stabilization Fund Bonds (hereinafter referred to as "Forex Stabilization Bonds") totaling USD 1.7 billion at the lowest-ever spread. This marks the largest single issuance of euro-denominated Forex Stabilization Bonds to date. Despite heightened domestic and international uncertainties surrounding Korea—such as rising tensions in the Middle East—foreign investors appear to have judged the Korean economy as stable.

On July 9, the Ministry of Economy and Finance announced the successful issuance of euro-denominated Forex Stabilization Bonds worth EUR 1.7 billion (approximately USD 1.94 billion). The bonds were issued in two tranches: EUR 700 million with a 3-year maturity, and EUR 1 billion with a 7-year maturity.

For the 7-year tranche, the volume surpassed the previous record for a single euro-denominated issuance, which was EUR 750 million in 2014. The Ministry of Economy and Finance stated, "By establishing a solid benchmark in the euro market, which ranks alongside the US dollar as a major global currency, we have laid the foundation for domestic issuers to secure foreign currency under more stable conditions."

The spread on these newly issued Forex Stabilization Bonds is the lowest in history. For both the 3-year and 7-year tranches, the spreads were 15 basis points (bp; 1bp = 0.01 percentage point) and 24bp lower, respectively, than the previous record lows set last year for bonds of the same maturity. According to the Ministry, this level is either lower than or comparable to the spreads on similar-maturity bonds issued by major developed countries, international organizations, and highly rated public sector issuers.

Since the spread on Forex Stabilization Bonds serves as a reference for overseas funding costs for Korean public enterprises and private companies, it is expected to reduce the foreign currency funding costs across all Korean issuers.

The government emphasized the significance of achieving a record-low spread even amid heightened external uncertainties, such as rising tensions in the Middle East.

Before the issuance, the government briefed major global institutional investors on Korea's growth strategies, including the AI transformation initiative to become a global AI powerhouse, competitiveness in advanced manufacturing, and the advancement of capital markets, highlighting the economy's entry into a new phase of dynamic growth.

The proceeds from this Forex Stabilization Bond issuance will be used to repay EUR 700 million worth of euro-denominated Forex Stabilization Bonds maturing in October this year.

Last year, the government significantly increased the annual issuance limit for Forex Stabilization Bonds to USD 5 billion to help stabilize the exchange rate. This is the second-largest amount in history, following the aftermath of the global financial crisis in 2009.

Heejae Kim, Director-General for International Finance at the Ministry of Economy and Finance, stated, "We have successfully completed the largest-ever annual issuance of USD 5 billion worth of Forex Stabilization Bonds. The government has smoothly absorbed supply in both the US dollar and euro markets this year, achieving record-low spreads and reaffirming global investors' strong confidence in Korean issuances."

This content was produced with the assistance of AI translation services.