Government to trim Q1 bond issuance to stabilize market
The South Korean government said on Wednesday it will reduce bond issuance by public institutions in the first quarter to help stabilize the bond market. A cut in issuance is expected to ease supply pressure, supporting bond prices and lowering yields.
The Ministry of Economy and Finance held the first meeting of the Bond Issuers’ Council and agreed to scale back planned bond issuance for March.
For Treasury bonds, the government will adhere to its first-quarter issuance target of 27 percent to 30 percent of the annual plan, but plans to adjust March issuance to a minimum level. Major public bond issuers, excluding Treasury bonds, will also reduce issuance by around 6 trillion won ($4.2 billion) in total during the first quarter compared with their initial annual plans. The move aims to ease the concentration of bond supply stemming from corporate bond maturities and to promote overall market stability.
Participants in the meeting included officials from the Ministry of Economy and Finance, the Financial Services Commission, the Financial Supervisory Service, Korea Development Bank, Export-Import Bank of Korea, Industrial Bank of Korea, Korea Electric Power Corp., Korea Housing Finance Corp., Korea Land and Housing Corp., and the Korea Student Aid Foundation, along with other key issuers of government-guaranteed and public-sector bonds. The government said it formed the council to strengthen interagency coordination on bond issuance management and market stabilization efforts.
The decision comes as Treasury yields have risen recently due to supply concerns. The yield on three-year Treasury bonds, which hovered in the 2.9 percent range at the beginning of the year, climbed to the 3.2 percent range in mid-February and currently stands in the 3.12 percent range.
Earlier this month, Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol said at a market monitoring meeting that Treasury yields had edged higher due to rising Japanese interest rates and supply pressures. He added that the government would strengthen monitoring of the overall bond market, including Treasury securities.
With the planned reduction in issuance, bond supply is expected to decline within the first quarter, which could support prices and lower yields. A decline in the three-year Treasury yield — a benchmark for market rates — may also lead to broader declines in market interest rates.
By Na Hyun-jun and Minu Kim
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]
