Mirae Asset Securities opens October subscriptions for individual-investment government bonds, boosts 10-year bond supply

[Financial News] Mirae Asset Securities will open October subscriptions for government bonds for individual investors, which can be used to manage long-term funds through dedicated accounts and retirement pension accounts. Of the total 230 billion won to be issued, the supply of 10-year bonds has been increased to 150 billion won. The company plans to attract investment demand focused on long-term government bonds, which offer additional interest and the benefits of compounding when held to maturity.
Mirae Asset Securities said on the 8th that it will accept applications for individual-investment government bonds for five business days, excluding public holidays, from the 8th through the 15th. Applications can be submitted from 9 a.m. to 4 p.m. on business days.
Customers with dedicated accounts can apply at branches nationwide or through the mobile trading system (MTS) MAPS. Subscribers to defined contribution (DC) or individual retirement pension (IRP) plans can invest in 10-year and 20-year bonds through the retirement pension products section of MAPS and other channels.
The amount to be issued this month is 230 billion won, unchanged from the previous month. The supply by maturity consists of 2 billion won in three-year coupon bonds, 3 billion won in three-year compound-interest bonds, 30 billion won in five-year bonds, 150 billion won in 10-year bonds and 45 billion won in 20-year bonds. Compared with last month, the supply of 10-year bonds is up 40 billion won, while that of five-year and 20-year bonds is down 20 billion won each. The issuance of three-year bonds is unchanged.
If applications for an individual bond issue do not exceed its supply, applicants will be allocated the full amount they applied for. In the event of oversubscription, an equal amount of up to the benchmark of 3 million won will be allocated first, with the remaining bonds distributed in proportion to the amounts applied for.
The coupon rates are 3.875% for three-year bonds, 4.275% for five-year bonds, 4.510% for 10-year bonds and 4.520% for 20-year bonds. The additional rates for holding bonds to maturity are 0.05 percentage points for five-year bonds, 0.28 percentage points for 10-year bonds and 0.43 percentage points for 20-year bonds. No additional rate applies to three-year bonds.
The estimated pretax cumulative returns for bonds held to maturity are approximately 11.6% for three-year coupon bonds, 12.1% for three-year compound-interest bonds, 23.6% for five-year bonds, 59.7% for 10-year bonds and 162.8% for 20-year bonds. The average annual returns, calculated by dividing these figures by the number of years held, are approximately 3.9%, 4.0%, 4.7%, 6.0% and 8.1%, respectively.
Demand for subscriptions is also exceeding the amount being issued. In September, applications totaling 258.5 billion won were received for a planned supply of 230 billion won, resulting in a subscription rate of 112%. From the beginning of this year through September, cumulative applications received through Mirae Asset Securities, the sole sales agent, totaled about 2.4 trillion won. The average subscription ratio against the 1.64 trillion won offered during the same period was 1.47 to 1.
A Mirae Asset Securities representative said, "Since retirement-pension-type government bonds for individual investors were introduced last September, customers have continued to show interest in using long-term government bonds to manage their pension assets." The representative added, "Given the stability of government-issued bonds, the benefits of long-term compounding and the tax characteristics of each account, these bonds can serve as one component of a long-term asset management portfolio."
A representative of the financial investment industry said, "Because the return structure of government bonds for individual investors is designed on the assumption that they will be held to maturity, investors should consider not only interest rates but also when they may need the funds." The representative added, "It is important to consider the tax differences between dedicated accounts and retirement pension accounts and use them in line with long-term goals, such as retirement savings."

[email protected] Choi Doo-sun Reporter