Q1 Government Bond Issuance Hits 62 Trillion Won... Record High Due to COVID-19

[Asia Economy Reporter Eunmo Koo] Due to the government's expansionary fiscal policy, the issuance of government bonds in the first quarter of this year exceeded the 60 trillion won mark for the first time, setting an all-time high. The issuance volume of special bonds issued by public institutions also reached the highest level in about five years.

According to the Korea Financial Investment Association on the 13th, the issuance amount of government bonds, including treasury bonds and fiscal securities, in the first quarter of this year recorded 62.4 trillion won, a 29.6% increase compared to the same period last year. This is a 155.7% increase compared to the previous quarter. Typically, government bonds are issued more in the first half of the year, with repayments mainly occurring in the second half. The issuance amount in the first quarter is the highest since related statistics began in 2006.

The net issuance amount of government bonds in the first quarter was also a record high at 49.7 trillion won. Net issuance is the issuance amount minus the repayment amount, indicating an increase in debt to be repaid in the future. The net issuance amount exceeded the previous record high of 33.6 trillion won in the first quarter of last year by more than 16 trillion won. As of the end of the first quarter, the outstanding balance of government bonds, which is the remaining debt after repayments, was 737.5 trillion won, increasing by the net issuance amount over three months.

The issuance amount of special bonds, which are issued by public institutions and indirectly guaranteed by the government, was 28.5 trillion won in the first quarter, the largest in about five years since the second quarter of 2015 (40.9 trillion won). The issuance amount of special bonds surged from 12.6 trillion won in the third quarter of last year to 23.9 trillion won in the fourth quarter, and increased further in the first quarter of this year. The net issuance amount was also 10.7 trillion won, the largest since the second quarter of 2015. The outstanding balance is around 342.9 trillion won.

The record-level issuance of government bonds in the first quarter of this year is due to the government's pursuit of expansionary fiscal policy and the increased fiscal spending amid economic uncertainty caused by the novel coronavirus infection (COVID-19). The National Assembly passed an additional supplementary budget of 11.7 trillion won for COVID-19 response on the 17th of last month, of which 10.3 trillion won will be financed by the government issuing deficit bonds.

The increase in the issuance volume of special bonds in the first quarter is attributed to the rise in the issuance of mortgage-backed securities (MBS) by the Korea Housing Finance Corporation. Since September last year, the government has supplied the Eoljuka-type Safe Conversion Loan to reduce household debt, which led to an increase in the MBS issuance volume by the Housing Finance Corporation to securitize these loans.

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