South Korea's government bond issuance relies heavily on ultra-long maturities, with bonds of 20 years or longer accounting for 34% of total issuance, according to data from Standard & Poor's requested by E-Daily. This proportion is nearly four times higher than the United States' 9%, while Korea's short-term bond issuance (3 months to 1 year) stands at just 7% compared to 29% in the US. The divergence raises concerns about the government's long-term interest burden and refinancing pressure as central banks in both countries face potential rate hikes. Within Korea's long-term bond category, 30-year bonds represent 30% of issuance, with yields on these instruments exceeding 4.4% in early this period — the highest level since the Korea Financial Investment Association began tracking rates in 2012.
Korea's Bond Maturity Structure Contrasts with US Data
Data provided by Standard & Poor's to E-Daily shows South Korea's 20-year and longer bond issuance at 34%, the highest among major economies and approximately four times the United States' 9%. Korea's short-term bond issuance (3 months to 1 year) represents 7% of total issuance, while the US allocates 29% to this maturity range. Within Korea's long-term bond structure, 30-year bonds account for 30% of issuance. Korea focuses on long-term funding while the US emphasizes short-term debt instruments.
Rising Yields Increase Government Financing Costs
Recent 30-year government bond yields exceeded 4.4%, marking the highest level since the Korea Financial Investment Association began compiling benchmark rates in 2012. According to the Ministry of Economy and Finance, the latest 30-year bond auction recorded a yield of 4.370%, exceeding the 4.155% rate from early last month by more than 20 basis points (1bp = 0.01 percentage point). The concentration in ultra-long bonds extends the government's future interest payment obligations, requiring higher interest payments over longer periods.
Experts Recommend Diversification and Issuance Reduction
Kim Jung-sik, professor of economics at Yonsei University, stated: "Central bank rate hikes have an impact, but long-term bond yields typically move based on supply and demand. The fundamental solution is to reduce the proportion of long-term bonds and, most importantly, reduce government bond issuance itself." Jang Bo-sung, research fellow at the Korea Capital Market Institute, noted: "We have already entered a rate hike cycle, so pressure is concentrated on government bond yields. With shocks currently concentrated in the long-term maturity segment, there is a need to diversify short-term instruments with maturities within one year."
Government Plans to Lower Ultra-Long Bond Proportion to 30%
The government has adopted a policy to adjust ultra-long bond issuance proportions in response to the rate hike cycle. A Ministry of Economy and Finance official stated: "We always adjust proportions flexibly according to market conditions. We previously indicated an annual ultra-long bond issuance ratio of 30-35%, but considering market conditions, we plan to issue at the lower end of 30%."
FAQ
What is the proportion of South Korea's ultra-long government bonds compared to the United States?
South Korea's bonds with maturities of 20 years or longer account for 34% of total issuance, nearly four times the United States' 9%, according to Standard & Poor's data requested by E-Daily.
Why are experts concerned about Korea's bond maturity structure?
Experts warn that the concentration in ultra-long bonds during a rate hike cycle increases the government's long-term interest burden and refinancing pressure. Kim Jung-sik of Yonsei University emphasized that the fundamental solution is to reduce long-term bond proportions and overall government bond issuance, while Jang Bo-sung of the Korea Capital Market Institute recommended diversifying short-term instruments with maturities within one year.
