Export-Import Bank of Korea sells $500 mn euro bonds with negative yield

The Export-Import Bank of Korea (KEXIM) has issued euro-currency bonds worth $500 million at a negative interest rate, the bank said on Sept. 15, less than a week after the South Korean government raised $700 million in negative-yielding bonds denominated in the euro.

The three-year debt is KEXIM’s first social bond issue floated in the euro, with the proceeds to be used to fund government projects and support small businesses. The bond carries a yield of minus 0.118%, the lowest on record among Korean debt issued so far.

The new euro-currency debt is part of the policy bank’s $1.5 billion bond sales made in three tranches. The other two tranches consist of $400 million five-year dollar bonds and $500 million 10-year dollar bonds. They were issued at yields of 0.758% and 1.316%, respectively.

The yield on the 10-year dollar-denominated bonds marked the lowest level for Korean debt issued since the 2008 global financial crisis.

They were five times oversubscribed, drawing bids from 251 institutions, said KEXIM.

Bank of America, HSBC, ING Group, JPMorgan and Mizuho Bank handled the bond sale.

Last week, South Korea became the first non-European country to sell negative-yielding sovereign bonds in the euro. The five-year sovereign carried a yield of minus 0.059%, or 35 basis points above the five-year euro mid-swap rate, according to the finance ministry.

After paying hefty premiums to raise $700 million in dollar bonds in April, KEXIM tapped the Australian bond market to cut funding costs. It sold A$700 million worth of bonds denominated in Australian dollars in May.

Other state-run Korean institutions are lining up to sell global bonds to take advantage of lowered borrowing costs.

Korea National Oil Corp. said it would raise $600 million through a global bond sale later this month. Korea Gas Corp. plans to issue global bonds worth at least $800 million by the end of next year to fund overseas investments.

Write to Soo-Young Seong at syoung@hankyung.com