$1 Billion in Foreign Exchange Equalization Bonds Issued

According to the Ministry of Finance and Economy (MOFE) on May 30, $1 billion worth of Korean Foreign Exchange Equalization Bonds (FEEB) were issued in the New York global bond market.

The 10-year issued bonds with coupon interest rate, due in 2013, are fixed at 4.25 percent, as the risk premium stands at lower-than-expected 0.92 percentage points above the yield on the benchmark U.S. treasury bonds, according to the MOFE.

This interest rate is the lowest among 10-year state bonds issued by Asian countries to date, and one of the world`s lows following the Asia-wide currency crisis in the late 1990s, the MOFE added.

As for government, they would save interest expanses worth of $46 million for the first time since its first issue of FEEB in 1998 (par annual interest rate of 8.875%).

“The current global bond market is in good shape and President Roh Moo-hyun’s visit to the U.S. has improved faith in the Korean economy. So far there are purchase orders of $4.8 billion, that is why interest rates have gone down,” explains Kwon Tae-shin International Operation Policy Officer at MOFE.

The trustees of this FEEB are Goldman Sachs, Citigroup and Barclays. After registration with the Securities & Exchange Commission (SEC), the bonds will be officially traded in the New York, London, Hong Kong and various international financial markets starting from June 3.

Kwan-Hee Hong Kwang-Hyun Kim konihong@donga.com kkh@donga.com