Additional Issuance of 5-Year Government Bonds for Individual Investors

10-Year Bonds Undersubscribed for Four Consecutive Months
System Overhaul Includes Diversified Maturities Amid Sluggish Sales

Yonhap News

The government will issue additional 5-year "government bonds for individual investors" and expand the annual purchase limit to 200 million KRW. Following the introduction of government bonds for individual investors, sales have been sluggish, with both 10-year and 20-year bonds undersubscribed. To address this, the government is diversifying maturities and expanding tax benefits.

On the 22nd, the Ministry of Economy and Finance announced that the amendment to the "Regulations on the Issuance and Redemption of Government Bonds for Individual Investors" will be implemented starting March.

According to the revised announcement, in addition to the previously issued 10-year and 20-year government bonds for individual investors, 5-year bonds will be newly issued from March this year. The interest income from the 5-year bonds will receive the same separate taxation benefits as the 10-year and 20-year bonds. The annual purchase limit per person will also be expanded from a maximum of 100 million KRW to 200 million KRW.

The Ministry of Economy and Finance is issuing short-term government bonds for individual investors as part of the policy goal of "supporting asset formation for national retirement preparation" due to sluggish sales.

The 10-year government bonds for individual investors saw a subscription rate drop to 0.29 to 1 just four months after introduction in September last year, and have experienced undersubscription for four consecutive months up to this month (December was not issued). The 20-year bonds have been undersubscribed for seven consecutive months since their introduction up to this month.

This is believed to be due to the decline in market interest rates following the interest rate cuts, which caused government bond yields to fall, reducing their investment attractiveness.

To expand the demand base, penalties for early redemption will also be minimized. The Ministry explained, "To minimize uncertainty regarding early redemption, a regulation allowing adjustment of the redemption limit based on the amount requested for early redemption will be newly established to minimize investor inconvenience." Previously, early redemption was possible on a first-come, first-served basis within the total redemption limit, and if the requested amount exceeded the redemption limit, early redemption was not possible.

To improve subscription convenience, the monthly subscription period will be extended from 3 days to 5 days, and the daily subscription closing time will be extended by 30 minutes to 4 PM. A "regular automatic subscription service" will also be introduced, allowing individual investors to pre-set desired bonds and amounts so that subscription applications are automatically made during the designated period.

A Ministry of Economy and Finance official expressed, "With this plan to revitalize investment in government bonds for individual investors, more citizens will be able to easily participate in the government bond market, expanding the demand base and becoming one of the investment tools contributing to stable asset formation for the public."

The amendment will go through procedures such as consultation with related agencies and administrative notice until the 12th of next month before being implemented.

Government bonds for individual investors are products that, if held until maturity, offer benefits such as nominal interest rates and compound interest applied annually on the additional interest rate. Interest income up to 200 million KRW is subject to separate taxation at 14%, so investors do not need to worry about comprehensive financial income taxation. To encourage holding until maturity, principal and interest are paid in a lump sum on the maturity date. These bonds cannot be traded in the market and early redemption is only possible after one year of subscription.

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