Seoul’s Euro-Denominated Sovereign Bonds Surge on Global Demand (Image supported by ChatGPT)
SEJONG, July 7 (Korea Bizwire) — South Korea’s latest euro-denominated foreign exchange stabilization bond (FESB) offering in London has garnered record-breaking demand, signaling strong global investor confidence in the country’s fiscal and economic outlook under its newly inaugurated administration.
According to the Ministry of Economy and Finance, the €1.4 billion issuance on June 26 attracted more than €19 billion (approx. $30 billion) in orders within just 90 minutes—13 times the issuance size and the largest order book in the country’s eurobond history.
The issuance was split evenly between three- and seven-year maturities. Despite initially conservative pricing, overwhelming investor interest allowed South Korea to lower the yield spread twice during the book-building process.
The final spreads were set at 0.25 percentage points for the three-year tranche and 0.52 points for the seven-year tranche, both significantly tighter than comparable sovereign issues, including a recent eight-year eurobond by Hong Kong priced at 0.75 percentage points.
“This was an unusual case where even as we lowered the yield, orders kept rising,” said a finance ministry official. “The final adjustment allowed us to cut annual interest payments by more than 3 billion won (approx. $2.2 million).”
The success, analysts say, was buoyed by a combination of favorable timing and market sentiment. The issuance followed a tentative ceasefire in the Middle East and came shortly after upbeat investor roadshows in London.
Optimism over the policy direction of President Lee Jae-myung’s new administration also played a role in sustaining appetite for Korean sovereign debt, even as South Korea’s inclusion in the World Government Bond Index (WGBI) was postponed from November to April next year.
Recent successful offshore bond offerings by state-run lenders, such as the Export-Import Bank of Korea and Industrial Bank of Korea, have further supported demand for so-called “Korean paper” in global markets.
With a record $3.5 billion FESB issuance cap set for 2025—the highest since the global financial crisis—the government is expected to issue additional foreign currency bonds using the remaining $1.9 billion quota later this year.
M. H. Lee (mhlee@koreabizwire.com)
