BOK Extends One-Year MSB Issuance Period to Three Months... Introduces Benchmark Issues

Early Redemptions to Be Held Twice a Month
Benchmark Issues by Maturity Introduced
"Strengthening the Benchmark Function"
Measures Take Effect at the End of This Month

The Bank of Korea will extend the consolidated issuance period for one-year Monetary Stabilization Bonds (MSBs) to three months and increase the frequency of early redemption to twice a month. In addition, the central bank will introduce the concept of "benchmark issues by maturity," aiming to strengthen the market benchmark (reference interest rate) function of MSBs.

Bank of Korea building.

On August 10, the Bank of Korea announced these changes to its MSB issuance and operation system, aiming to enhance both the liquidity of MSB trading in the secondary market and the reserve adjustment function of these bonds.

Monetary Stabilization Bonds are special securities issued by the Bank of Korea to regulate money supply when market liquidity surges, for instance due to stock market revitalization or current account surpluses. They are certificates that promise repayment of principal and interest at maturity in exchange for borrowing funds for a set period.

To boost the liquidity of one-year MSBs, the Bank of Korea will extend the consolidated issuance period from two months to three months. Accordingly, the consolidated issuance dates will shift from January, March, May, July, September, and November 9 each year to March, June, September, and December 1.

The number of early redemptions will also be increased from once to twice a month. Early redemption will be divided into "Early Redemption I" (on the first Tuesday of each month) and "Early Redemption II" (on the third Tuesday). Early Redemption I will follow the previous regular early redemption framework, targeting three issues each round (one one-year issue plus two issues with two- or three-year maturities) based on the remaining maturity schedule. For one-year MSBs, qualifying remaining maturities for early redemption have been adjusted to 4, 5, and 6 months in light of the extended issuance period.

Early Redemption II will target around three issues per session, and the specific securities will be announced each month through the MSB issuance plan. With this revision, any securities formerly excluded from Early Redemption I will be included in Early Redemption II for that month.

Bidding schedules will also be adjusted: two-year MSB bids move from the first Wednesday to the second Wednesday of each month, while one-year MSB bids shift from the second Wednesday to the first Wednesday.

Furthermore, to strengthen the market benchmark function of MSBs, the Bank of Korea will introduce "benchmark issues by maturity." The most recently issued bond for each maturity, among competitively bid MSBs, will be designated as the benchmark issue. The central bank plans to further enhance liquidity and the benchmark role of these issues in consultation with relevant institutions.

The revised framework takes effect from August 31, 2026. A Bank of Korea official stated, "These updates will be reflected starting from the September MSB issuance plan, which is scheduled to be announced on the 27th."

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