Government to Pursue Inclusion in 'World Government Bond Index'... Resolving Korea Discount

Vice Minister Choi Sang-dae Holds 'Government Bond Market Meeting'

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Kwon Haeyoung] The government is actively promoting the inclusion of Korea in the World Government Bond Index (WGBI) to resolve the Korea discount in the government bond market.

Choi Sang-dae, the 2nd Vice Minister of the Ministry of Economy and Finance, held a 'Government Bond Market Meeting' on the 24th at the Bankers' Hall with foreign investment institutions, research institutes, and the Korea Securities Depository, stating, "We are actively pursuing institutional improvements to include Korea in the WGBI and improve the foreign investment environment." At the meeting, recent government bond market conditions, expected effects and plans for WGBI inclusion, and plans to revitalize foreign investment in government bonds through the International Central Securities Depository (ICSD) were discussed.

Vice Minister Choi said, "Although our government bond market has developed to an advanced level in terms of scale, the 'Won-denominated bond discount,' which requires paying high interest rates, still persists," adding, "The government has selected WGBI inclusion as a national agenda to advance the government bond market and eliminate the Won bond discount, and is actively promoting it."

The WGBI is a global advanced country bond index that includes government bonds from 23 major countries worldwide. Korea has not yet joined, but according to analysis by the Financial Research Institute, if Korea joins the WGBI, it is expected that foreign investment funds in government bonds amounting to 50 trillion to 60 trillion KRW will flow in. As a result, government bond yields are expected to fall, reducing annual government bond interest expenses by approximately 500 billion to 1.1 trillion KRW.

To be included in the WGBI, the government is also consulting with FTSE Russell, the index calculation agency. This agency announces candidate countries for observation every March and September and decides on final inclusion in September.

Additionally, the government is promoting improvements in the foreign investment environment using the ICSD. Foreign investors have continuously requested the activation of government bond trading through the ICSD for investment convenience, but due to administrative burdens related to taxation, this has not been realized. With the implementation of the tax exemption on foreign investors' government bond investment income included in this year's tax law amendment, an institutional foundation enabling government bond trading through the ICSD will be established. To improve the foreign investment environment, the government will also announce an 'Advanced Foreign Exchange Market Plan' in the third quarter, allowing overseas institutions to participate in the domestic foreign exchange market.

Vice Minister Choi emphasized regarding the recent government bond market, "We will closely monitor domestic and international market conditions and promptly implement market stabilization measures if volatility increases," adding, "We will continue to promote improvements in the foreign investment environment such as WGBI inclusion and utilization of the ICSD."

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