South Korea may sell 30-year bonds in 2012 for the first time as it seeks to raise the average maturity of debt and help the government and domestic investors manage risks, said an official from the finance ministry.
The securities may be issued in the second half of next year, said the official, who has knowledge of the discussions and declined to be identified because the talks are private. South Korean insurers and pension funds are seeking longer- maturity bonds to increase the stability of their investments, he said on Dec. 16 in comments embargoed until today.
The finance ministry currently sells bonds with tenors of three years, five years, 10 years and 20 years. Plans to sell debt maturing in less than three years in 2012 may be pushed back, according to the official. Hong Nam Ki, a spokesman at the finance ministry, wasn’t immediately available to comment.
“The new issuance plan reflects demand for longer-maturity bonds from Korea’s insurers and funds, and will strengthen the government’s fiscal status,” said Peter Park, a Seoul-based fixed-income analyst at Woori Investment & Securities Co. “The new bonds won’t raise current 10- and 20- year debt yields that much as the initial offer will probably be small, and the government will reduce 10- and 20- year bond sales.”
The finance ministry plans to sell 80.9 trillion won ($70 billion) in bonds next year, down from 82.4 trillion won in 2011, according to the government’s budget plan. The official declined to say how much of next year’s figure may be made up of 30-year bonds.
South Korea’s benchmark 20-year bonds yielded 4 percent as of 11:40 a.m. in Seoul, unchanged from the end of last week, according to Korea Exchange Inc. prices. The rate on benchmark 20-year notes was 4.68 percent at the start of this year and reached 3.65 percent on Sept. 14, the lowest level in Bloomberg data going back to January 2006. The three-year bond yield was 3.33 percent today, unchanged from the end of last week.
Indonesia’s benchmark 30-year bonds yielded 7.61 percent on Dec. 16, while similar-maturity U.S. Treasuries yield 2.84 percent, according to data compiled by Bloomberg.
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