Following the Government, Export-Import Bank Issues $1.5 Billion Foreign Currency Bonds... Government States "Need to Expand Foreign Exchange Reserves"

[Sejong=Asia Economy Reporter Kim Hyunjung] Following the government's issuance of $1.45 billion in foreign exchange stabilization bonds, the Export-Import Bank of Korea issued $1.5 billion in global bonds on the 15th. The government stated that, given the increasing uncertainty in the international financial market, it is necessary to expand foreign exchange reserves.

According to the Ministry of Economy and Finance, in the early hours of the day, the Export-Import Bank issued three types of global bonds: $400 million in 5-year dollar bonds, $500 million in 10-year dollar bonds, and €500 million in euro bonds.

The Export-Import Bank is evaluated to have significantly reduced borrowing costs by lowering the issuance interest rate, leveraging the momentum of the lowest-ever interest rate issuance of foreign exchange stabilization bonds. The spread on the Export-Import Bank's global bonds issued this time was set 10 to 15 basis points lower than the existing foreign currency bond trading rates of the bank, using last week's foreign exchange stabilization bond spread as a benchmark.

In particular, the euro bonds (-0.118%) were issued as negative interest rate bonds following the euro-denominated foreign exchange stabilization bonds. The 10-year dollar bonds (spread 65bp) were issued at the lowest spread since the 2008 crisis among the Export-Import Bank's bonds of the same maturity (previous lowest was 70bp in 2016). The 5-year dollar bonds (spread 50bp) were issued at a level close to the 5-year dollar bonds issued in February this year (lowest since 2008, 47.5bp).

The Ministry of Economy and Finance explained, "As many public and private institutions are preparing to issue overseas bonds following the Export-Import Bank, the positive effects of the lowest-ever interest rate issuance of foreign exchange stabilization bonds will become more visible. Similar to the Export-Import Bank case, the foreign exchange stabilization bond interest rate will be used as a benchmark when domestic public and private institutions issue overseas bonds, contributing to a decline in bond issuance rates." It added, "This will also have a positive effect on the overall decline in foreign currency borrowing rates by banks, beyond overseas bond issuance."

Regarding the successive issuance of foreign currency bonds, the Ministry of Economy and Finance explained that it reflects the judgment of the necessity to expand foreign exchange reserves. Kim Sungwook, Director General of the International Finance Bureau at the Ministry of Economy and Finance, emphasized, "Uncertainty in international finance due to COVID-19 still exists. There have been cases of significant short-term impact, and we do not know what may happen in the future. Preparing for that is our responsibility, so we feel the necessity to expand foreign exchange reserves."

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