South Korea's finance ministry: South Korea issues 20-year government bond with a yield of 2.715%.

South Korea's finance ministry: South Korea issues 20-year government bond with a yield of 2.715%.

South Korea has issued a 20-year government bond with a yield of 2.715%, marking a significant development in the country's debt market. The issuance comes amidst a surge in foreign demand for Korean sovereign bonds, driven by factors such as expectations of an imminent policy rate cut and the upcoming inclusion of Korean bonds in the World Government Bond Index (WGBI).

Foreign investors have shown increasing interest in Korean government bonds, with net purchases reaching KRW 16.1 trillion ($11.6 billion) in April, following a net purchase of KRW 13 trillion in March. This trend underscores the growing reputation of Korean sovereign bonds as a safe-haven asset, particularly in times of geopolitical uncertainty and trade tensions [2].

The issuance of the 20-year bond, with a yield of 2.715%, reflects the current market conditions and the attractiveness of Korean government bonds. The yield is lower than the previous average yield of 3.17% in 2022, indicating that investors are willing to accept a lower return in exchange for the perceived safety and stability of Korean bonds [2].

The Bank of Korea has held its policy rate at 2.75% since February and is expected to begin cutting rates later this year to stimulate the country's export-driven economy. This monetary easing is likely to drive demand for existing bonds, as their fixed coupon rates become more attractive compared to newly issued bonds with lower yields [2].

The issuance of the 20-year bond also aligns with the Korean government's strategy to attract foreign investment in sovereign debt. In the aftermath of the 1997 Asian financial crisis, Korea lifted the cap on foreign investment in listed bonds and has since introduced additional measures to bolster demand, including omnibus accounts and tax exemptions for foreign investors [2].

The upcoming inclusion of Korean sovereign bonds in the WGBI is expected to further boost demand. The WGBI, managed by London-based FTSE Russell, is a global benchmark for sovereign debt. Korean bonds will be added to the index in phases from April 2026 to November 2026, making them more appealing to foreign capital [2].

The issuance of the 20-year bond with a yield of 2.715% is a testament to the robust fiscal standing of South Korea and the growing attractiveness of its sovereign debt market. As the country continues to invest in artificial intelligence initiatives and engage in trade negotiations, the demand for Korean government bonds is likely to remain strong.

References:
[1] https://www.kaohooninternational.com/markets/558385
[2] https://www.koreaherald.com/article/10494956
[3] https://www.newsmax.com/us/us-south-korea-trade-imbalance/2025/05/26/id/1212338/