Net Government Bond Issuance Hits Record 124 Trillion Won, Surpassing COVID-19 Peak [fn Market Watch]

[Financial News] Net issuance of government bonds last year exceeded 124 trillion won, marking an all-time high. This even surpassed the 2021 issuance level, when the government expanded fiscal spending in response to Coronavirus disease 2019 (COVID-19).
According to Koscom CHECK on the 25th, net issuance of government bonds last year totaled 124.111 trillion won. This is about 4 trillion won higher than the previous record net issuance of 120.1667 trillion won in 2021. It is also 2.5 times the 48.6505 trillion won net issuance recorded in 2024. Government bonds consist largely of Treasury Bonds, National Housing Bonds, and other government bonds, with Treasury Bonds accounting for about 92% of the total. The new record was driven not only by the larger volume of Treasury Bonds, but also by a sharp increase in "other government bonds."
Looking at net issuance by type, Treasury Bonds jumped from 49.133 trillion won in 2024 to 112.2889 trillion won in 2025. Over the same period, other government bonds surged from 737.7 billion won to 14.8705 trillion won.
Net issuance of other government bonds reached 14.8705 trillion won, surpassing the previous peak of 8.9224 trillion won in 1997 during the IMF Crisis. While Treasury Bonds are issued to finance the government’s general budget, other government bonds are temporary issues created for specific policy purposes. Examples include bonds used for financial institution restructuring during the IMF Crisis or bonds issued to fund specific government funds.
Issuance of other government bonds began in earnest in 1997, at the height of the IMF Crisis. During the Credit Card Crisis in 2003, more than 7 trillion won in other government bonds was also issued on a net basis.
With government bond supply reaching unprecedented levels, the outstanding balance at the end of last year stood at 1,250.6388 trillion won.
On an outstanding basis, this is also a record high. Specifically, Treasury Bonds amounted to 1,159.4254 trillion won, National Housing Bonds to 75.6051 trillion won, and other government bonds to 15.6082 trillion won.
The flood of supply has become a trigger for rising yields in the bond market. As government bond issuance surged, the yield on the 3-year Korean Treasury bond climbed from 2.507% per annum in early January last year to 3.137% as of the 23rd of this month. Over the same period, the yield on the KEPCO 3-year corporate bond jumped from 3.002% to 3.401% per annum.
Last year, the Bank of Korea (BOK) Monetary Policy Board cut the base rate twice. The base rate, which was 3.0% per annum at the start of the year, has been lowered to 2.50%. Nevertheless, yields on Treasury Bonds, KEPCO bonds, and corporate bonds have all risen. Analysts say domestic bond yields have climbed rapidly due to expanded Treasury Bond issuance following a large supplementary budget, weaker expectations for further base rate cuts, and upward pressure on interest rates originating from Japan.
In the bond market, government bonds have become a black hole absorbing institutional investment funds. As a result, the investment capacity of major institutions such as pension funds has shrunk, and there is growing criticism that Special Purpose Bonds issued by public corporations have struggled to come to market. With bond issuance facing difficulties, not a few institutions have opted to repay instead of rolling over their debt. Last year, net redemption of KEPCO bonds reached 4.11 trillion won, while net redemption of Korea Housing Finance Corporation bonds totaled 20.8108 trillion won. Net redemption means that maturing bonds are being repaid in cash rather than refinanced with new issuance.
khj91@fnnews.com Kim Hyun-jung Reporter