The government issued $3 billion in U.S. dollar-denominated Foreign Exchange Equalization Fund bonds (foreign exchange stabilization bonds). This is the largest issuance of dollar foreign exchange stabilization bonds since 2009 during the global financial crisis. The move is seen as an effort to shore up foreign exchange reserves through the issuance and respond to the recent trend of a strong dollar-won exchange rate.
The Ministry of Finance and Economy said on Feb. 6 that it successfully issued $3 billion (about 4.4 trillion won) in U.S. dollar-denominated foreign exchange stabilization bonds.
Foreign exchange stabilization bonds are Government Bonds issued to raise funds for the "Foreign Exchange Equalization Fund," which the government creates to stabilize the exchange rate. As a single issuance, it is the largest since 2009 ($3 billion).
This issuance is split into $1 billion with a 3-year maturity and $2 billion with a 5-year maturity. The coupon is 3.683% for the 3-year (spread 9 bp; 1 bp = 0.01 percentage point) and 3.915% for the 5-year (spread 12 bp).
The ministry said, "Amid heightened external uncertainties such as rising geopolitical tensions and the spotlight on tariff issues, we have preemptively and significantly expanded foreign exchange reserves, which serve as an external safeguard for stabilizing the foreign exchange market," adding, "We have also secured funds early to repay foreign exchange stabilization bonds maturing in Sep. this year (¥33 billion) and Oct. (€700 million)."
It also said, "By issuing the 3-year foreign exchange stabilization bonds at a single-digit spread over U.S. Treasurys, we were able to clearly confirm that our Government Bonds, based on high external credibility, are being evaluated as world-class high-quality asset and that there is no problem at all with our ability to raise foreign currency in international financial markets."
The ministry said, "For domestic institutions seeking to raise foreign currency for purposes such as overseas investment, the record-low spread on these foreign exchange stabilization bonds can serve as a benchmark, enabling them to raise foreign currency overseas on even more favorable terms."