SEOUL, February 06 (AJP) - South Korea on Thursday sold $3 billion in U.S. dollar-denominated bonds in its largest single sovereign offering since the aftermath of global financial crisis, building up the ammunition to defend the local currency while the debt environment remains favorable.
According to the Ministry of Economy and Finance on Friday, the government issued $3 billion in foreign exchange stabilization bonds in two tranches: $1 billion in three-year notes and $2 billion in five-year bonds.
The three-year papers were priced at 3.683 percent, or nine basis points above comparable U.S. Treasuries, while the five-year notes carried a yield of 3.915 percent, or 12 basis points over benchmark Treasuries.
The deal marks the largest sovereign dollar bond issuance since April 2009, when Seoul raised $3 billion in the aftermath of the global financial crisis.
Foreign exchange stabilization bond issuance has historically increased during periods of won weakness. The latest offering reflects the government’s increasingly firm stance on defending the currency.
As of Friday, the won closed at 1,469.5 per dollar, surpassing its monthly average, under pressure from a strong greenback and persistent foreign capital outflows.
The issuance is also aimed at replenishing foreign currency reserves. South Korea spent a total of $4.75 billion between December 2025 and January 2026 to stabilize the won, an unusually aggressive intervention by global standards.
Most major economies typically build reserves toward year-end to meet capital adequacy requirements under the Bank for International Settlements framework. Korea, however, was the only major economy to substantially draw down dollar reserves in December.
Reserves Decline Despite Record Surplus
The reserve trend has raised concerns among policymakers.
The Bank of Korea said Friday that despite recording its largest-ever current account surplus in 2025, foreign exchange reserves fell by $4.44 billion over the year.
The central bank also confirmed this week that it had renewed its foreign exchange swap arrangement with the National Pension Service, highlighting ongoing efforts to secure dollar liquidity.
Officials said the bond sale was driven in part by growing risks from external shocks, particularly amid prolonged trade tensions with the United States.
On Jan. 27, U.S. President Donald Trump announced a 25 percent tariff hike on South Korean automobiles, citing delays in related legislation. The measure took effect this week.
The finance ministry said it had “preemptively expanded foreign exchange reserves, which serve as an external safety valve, amid heightened uncertainties such as tariffs,” signaling that trade risks were a key factor behind the issuance.
Geopolitical uncertainties were also considered, including instability in Venezuela and Iran and the prolonged war in Ukraine, all of which continue to weigh on global markets.
The narrow spreads achieved in the latest sale point to Korea’s improved credit standing.
During the 2009 financial crisis, spreads on 10-year Korean sovereign bonds surged to more than 430 basis points. After the 1998 IMF bailout, they exceeded 350 basis points.
By contrast, the current spread of around 10 basis points over U.S. Treasuries is comparable to that of top-rated advanced economies and major international institutions.
“This demonstrates that the so-called ‘Korea discount’ is steadily disappearing in the global sovereign bond market,” the ministry said.
Foreign investor demand for Korean debt has strengthened further ahead of Korea’s scheduled inclusion in the World Government Bond Index between April and November.
Copyright ⓒ Aju Press All rights reserved.