Lightning Decision
The Ministry of Strategy & Finance of South Korea decided on January 11 to issue a foreign exchange stabilization bond of US$1 billion. The announcement was made immediately after Strategy & Finance Minister Yoo Il-ho’s meeting with entrepreneurs on the current state of the South Korean economy in New York.
“We made the decision in view of the favorable conditions of financial markets and we are receiving orders from Asian markets first,” he mentioned.
The issuance is scheduled to be initiated in New York on January 12 before the determination of the coupon rate and size. According to industry sources, the coupon rate is estimated at approximately 3%, a record low, with the 10-year Treasury bond yield having fallen to 2.369% after the recent press interview of U.S. President-elect Donald Trump.
The Ministry of Strategy & Finance is planning to set the size at up to US$1 billion. It is expecting that the issuance will be successful based on sufficient market demands and South Korea’s sovereign credit rating raised last year.
A successful issuance signifies that foreign investors still have a positive view on the South Korean economy in spite of the Choi Soon-sil scandal and the impeachment of President Park Geun-hye. Then, it can assist in the issuance of international bonds by South Korean financial companies and enterprises.