South Korea to Issue Won-Denominated Forex Stabilization Bonds for the First Time in 22 Years

The Ministry of Economy and Finance has unveiled plans to issue won-denominated foreign exchange stabilization bonds starting January, marking a significant move after a 22-year hiatus since 2003. These bonds are crucial for funding the Foreign Exchange Stabilization Fund, aimed at stabilizing the won-dollar exchange rate.

Following the enactment of the revised 'Act on Electronic Registration of Stocks and Bonds' on December 10 and the finalization of related budgets, the conditions for issuing these bonds have been met. The initial issuance is scheduled for January 24, with the government planning to issue 800 billion won worth of bonds through competitive bidding in January.

The government's strategy involves a flexible annual issuance within a 20 trillion won cap, as outlined in the 2025 budget proposal. A significant portion of the issuance is allocated to the second half of the year to ensure market stability, with 12 to 15 percent in the first quarter and 40 to 45 percent in the first half.

This initiative is expected to reduce annual interest expenses by approximately 100 billion won. Detailed regulations on the issuance and operation of these bonds will be announced on December 31, with bidding schedules and methods disclosed three days before each auction.