On February 5, the Government successfully issued USD 3 billion Foreign Exchange Equalization Fund Bonds (USD FX Fund Bonds).

The bonds were issued in a dual tranche, with USD 1 billion maturing in three years and USD 2 billion maturing in five years.

 ¹⁾ Issuance rate: the benchmark rate for the same currency and maturity plus spread.

²⁾ Coupon rate: the interest rate actually paid to bondholders (for USD bonds, typically set in increments of 0.125%).

This issuance carries the following implications:

First, the issuance of three-year FX Fund Bonds at a single-digit spread of +9 basis points over U.S. Treasuries clearly demonstrates that Korean government bonds are regarded as top-tier assets in global financial markets, reflecting the country’s strong external credit standing, and that Korea faces no difficulty in raising foreign currency funding in international markets.

In particular, a spread of around 10 basis points over U.S. Treasuries – widely regarded as the world’s premier safe-haven asset – is lower than or comparable to that of the highest-rated international organizations and advanced-economy sovereigns, indicating that the so-called “Korea discount” in the market for Korean credits (foreign-currency bonds issued by Korean institutions) is being steadily eliminated.

In addition, the five-year tranche set a new record low spread for the second time, following the previous issuance in October last year, once again confirming that global investors’ appetite for and assessment of Korea’s economy and policy direction are improving at a rapid pace.

Second, amid heightened external uncertainties stemming from rising geopolitical tensions and escalating tariff issues, the government proactively and substantially strengthened its FX reserves, which serve as a key external safety buffer by helping stabilize the FX market. The size of the current issuance (USD 3 billion) represents the largest single foreign-currency bond issuance since 2009 (USD 3 billion). Furthermore, the government has secured in advance the funds needed to redeem FX Fund Bonds maturing in September this year (JPY 33 billion, issued in 2023) and in October (EUR 700 million, issued in 2021).

Third, despite challenging issuance conditions in a volatile global financial market environment, the bonds were issued at an opportune time with careful preparatory work.

Anticipating a potential increase in market uncertainty, the government began preparations for the current FX Fund Bonds issuance in late last year to ensure the ability to issue flexibly in response to market conditions. In particular, through group calls and one-on-one virtual meetings with global investors, the government actively highlighted Korea’s strengthened economic fundamentals, including its traditional manufacturing competitiveness in semiconductors, automobiles, shipbuilding, and defense, as well as enhanced soft power such as K-culture, growing AI capabilities, revitalization of the capital market including the KOSPI, and Korea’s inclusion in the World Government Bond Index (WGBI).

Building on these efforts, issuance was swiftly executed during a window of reduced market volatility in recent days, amid developments such as the agreement on the U.S. budget and the prospect of U.S.-Iran negotiations, thereby attracting strong investor interest.

Fourth, following the issuance of USD FX Fund Bonds in 2024 and EUR- and USD FX Fund Bonds in 2025, the government once again successfully issued the bonds under the SSA format[1], further cementing advanced sovereign issuance practices in the global bond market and reinforcing Korea’s status as a high-quality issuer.

Last but not least, the issuance helped create an environment in which Korean corporations and financial institutions can secure foreign currency more favorably in global markets. Domestic institutions seeking to raise foreign currency for overseas investment purposes are expected to access it on more advantageous terms, using the record-low spreads of this FX Fund Bond issuance as a benchmark.