JKGC Successfully Issues Negative Interest Rate Overseas Bonds

[Asia Economy Reporter Kim Hyo-jin] The Financial Services Commission and Korea Housing Finance Corporation (KHFC) announced on the 30th that they successfully issued 1 billion euros (approximately 1.3 trillion KRW) worth of KHFC covered bonds (5-year maturity) in the eurobond market at an annual rate of -0.02%.

The issuance rate of this covered bond was determined by adding a spread (0.24%) to the benchmark rate, the Euro Mid Swap (-0.26%).

The spread is the lowest ever among Korean bonds issued in euros, and the issuance rate marks the first time an Asian country’s bond was issued at a negative rate in the euro market, and the second time for a non-European country.

Covered bonds are bonds issued by financial institutions secured by high-quality assets such as mortgage loans. Investors have dual priority claims: a repayment claim against the issuer and a preferential right to be repaid ahead of third parties from the cover pool of underlying assets provided as collateral by the issuer.

This overseas bond issuance represents the largest ever for KHFC, with a net increase of 1 billion euros, responding to the recent increased demand for policy mortgages such as Safe Conversion Loans and Bogeumjari Loans.

A total of 59 global investors, including central banks and international organizations from various countries, participated, demonstrating high interest and trust in Korean bonds and KHFC bonds, according to the Financial Services Commission.

The Financial Services Commission stated, "The issuance scale and rate are meaningful as global investors in Europe and elsewhere positively evaluated Korea’s household loan management policies and KHFC’s efforts to enhance bond value."

The Commission added, "KHFC has gained investors’ trust in periodic bond supply through this issuance, following October 2018 and June last year, firmly establishing itself as a single investment target for global bond market investors."

The Financial Services Commission expects this issuance to positively contribute to alleviating concerns about supply-demand instability in the bond market, which had been raised recently due to the expansion of Safe Loans and policy mortgage supply.

The Financial Services Commission and KHFC plan to continuously use the funds raised at low interest rates to reduce housing costs for low-income households without homeownership.

This content was produced with the assistance of AI translation services.