Mirae Asset Securities Selected as Final Agent for Retail Government Bond Sales

by Song Hwajung

Published 04 Mar.2024 17:22(KST)

Mirae Asset Securities announced on the 4th that it has finalized the contract as the first sales agency for the individual investor government bonds being launched for the first time this year. It means that Mirae Asset Securities is the only institution in the entire financial sector where individual investors can purchase these government bonds.

[Image source=Yonhap News]

Individual investor government bonds are savings-type government bonds issued exclusively for individuals, and they are already introduced and issued in major advanced countries such as the United States, Japan, and Singapore. The first issuance of individual investor government bonds is scheduled for June this year, and investments can be made through a dedicated account for individual investor government bonds.

These bonds are principal and interest guaranteed, expected to be issued at an annual total of around 1 trillion KRW in 10-year and 20-year maturities. Subscriptions can be made from a minimum of 100,000 KRW up to 100 million KRW annually. Early redemption is possible anytime after one year from purchase, but only within the total monthly limit, and may not be available if the limit is exhausted.

If the bonds are held until maturity, interest calculated with compound annual interest, including the coupon rate plus an additional premium, will be paid in a lump sum on the maturity date. According to the Ministry of Economy and Finance, if the coupon rate of individual investor government bonds is 3.5%, the estimated maturity yield for the 10-year bond is 41% (35% after tax), and for the 20-year bond, 99% (84% after tax). The average annual yield before tax is 4.1% (3.5% after tax) for the 10-year bond and 4.9% (4.2% after tax) for the 20-year bond. Of course, depending on the level of the additional premium at issuance, the maturity yield and average annual yield may be even higher.

Additionally, individual investor government bonds offer a tax-saving benefit by applying separate taxation (14%) on interest income up to a total purchase amount of 200 million KRW, making it a good option to reduce taxes.

A representative from Mirae Asset Securities stated, "Individual investor government bonds guarantee high interest rates for 10 to 20 years and have the highest stability as the issuer is the government. We expect them to attract interest from the entire population regardless of age or income." He added, "They will meet demands such as seeking stable returns and building lump sums through installment purchases, contributing to the healthy asset growth of the public."

As the sole sales agency, Mirae Asset Securities formed a dedicated task force (TF) at the end of January to prepare for the bond sales scheduled for June, and will open a consultation center on the 6th of this month to respond to inquiries related to individual investor government bonds.