Extra Issuance Less Than Expected

Markets await the results of the MOF 30-year bond auction, after the BoK sold KRW 250bn 6-month bills. Yields are flat across the curve so far, but futures are higher. The 10-year future up 26 ticks at 127.24, but off session highs at 128.02 – the market is playing catch up after being closed for a local holiday yesterday.

• It was announced last week that the MOF would issue an extra KRW 9.9tn of government bonds to fund the latest extra budget, in addition to the record KRW 176.4tn issuance already announced, however it is less than the KRW 12tn – KRW 20tn range that was floated, with the ruling democratic party pushing for the larger figure.
• The finance ministry will submit the budget proposal to lawmakers on March 4. If the plan is approved, it will increase South Korea's government's debt ratio to 48.2% of GDP, up from 47.3%.
• Following a spike in yields last week, the BoK has pledged to support the space, setting out plans to purchase up to KRW 7tn of government bonds from the market in the first half of this year, compared to KRW 11tn for the whole of 2020.