The South Korean government was able to price $1 billion 10-year dollar-denominated foreign exchange stabilization bond at the cheapest rate ever, gaining confidence upon confirming still-intact appetite for Korean debt despite face-losing power abuse scandal that has led to impeachment of the president.

On Thursday in New York, the first 10-year Korean government issue following the president and her party’s epic fall from grace was priced at 2.871 percent, 55 basis points over the same maturity U.S. treasury benchmark yield. It was the cheapest yield Seoul has drawn since it issued dollar-denominated bonds to raise funds to defend its local currency against volatility in foreign exchange market.

The pricing was lower than comparative papers of Canadian state of Ontario and of state-run Japan Bank for International Cooperation whose 10-year bonds yielded 56 basis points over the U.S. treasury. The coupon rate was set at 2.75 percent. Korea’s government debt is rated AA or Aa2, the third highest on the Standard & Poor’s and Moody’s scale.

The book-building session drew $3 billion won - tripling the $1 billion offer - from 70 institutional investors with the lion’s share of 54 percent coming from Asia followed by American and European investors that took up 25 percent and 21 percent, respectively.

The issue would serve as a major morale boost to the Korean government fretting dent in creditworthiness due to prolonged leadership vacuum and political unrest as investigation and impeachment on President Park Geun-hye stretches on top of murky outlook for next presidency and deteriorating economic conditions.

The pricing in government paper would serve as benchmark for other public offerings on overseas debt market.

By Kim Gyu-sik

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]