Ministry of Strategy and Finance Issue Foreign Exchange Equalization Fund Bonds in 2024

[Leaders Times] On June 14, the government officially announced a mandate announcement for the issuance of foreign currency-denominated foreign exchange equalization funds bonds, making this year's issuance of foreign currency bonds official.

The issuance is the first U.S. dollar bond issuance since 2021, and it is meaningful to establish the status of a "regular bond issuer" by continuing the issuance of bonds that have been suspended.

Through this, the fund was created in 1967 under the abbreviation of foreign exchange equalization fund bonds. In order to prevent confusion in the foreign exchange market by speculative forces, the government intervenes in the foreign exchange market and issues bonds issued by the government in the form of payment guarantees to stabilize the exchange rate) will continue to create demand, securing a window for the government's foreign currency procurement that can be used at any time, if necessary,

It is expected to serve as an opportunity for domestic companies and financial institutions, which have recently been actively issuing foreign currency bonds, to fulfill their original function of providing a reference rate (benchmark), so that they can raise foreign currency at lower interest rates.

In addition, by introducing an advanced issuance method this time, it plans to actively attract excellent SSA (Sovereigns, Supranationals & Agencies) investors such as governments, central banks, international organizations, and policy financial institutions in each country.

This SSA-centered issuance is expected to have the effect of diversifying capital raising routes by expanding the base of investors, which were previously concentrated in Asian/asset management companies, to European/U.S./SSA high-quality investors, and in the mid-term to long-term, global high-quality investors are expected to spread their interest throughout domestic institutional bonds.

Moreover, the increased status through attracting high-quality investors is expected to serve as a factor in issuing foreign bonds at lower interest rates (increasing bond prices) in the future, and the stability of foreign bonds circulating in the market after issuance is expected to improve due to the nature of SSA investors who prefer to hold them for a long time rather than frequent transactions for investment returns.

It is also a significant change that foreign debt can minimize the so-called "building effect" of absorbing the demand for bond investment by other domestic institutions. As the government and domestic policy financial institutions pioneer a new group of investors called SSA, existing investors such as SSA who have purchased foreign debt are expected to expand their investment capacity, which will give domestic institutions an opportunity to raise foreign currency funds more easily.

Meanwhile, the government will also make every effort to prepare for issuance, including public relations for investors, so that the issuance of foreign bonds can be successful this year.

Prior to the issuance, a face-to-face investor presentation (road show) in London, where many SSA investors reside, is scheduled, followed by a "Global Investor Call (GIC)" for investors around the world, including Asia and the Americas, and plans to closely monitor trends in the international financial and bond issuance markets on a daily basis through active communication with market participants.

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