Gov't cuts treasury bond issuance by W5tr, eyes further reduction as Q4 public bond supply set at W59tr

The government has cut this month's treasury bond issuance by 5 trillion won ($3.75 billion) from its original plan to ease supply pressure in the bond market, and is now considering further reductions. Public bond issuance by major agencies excluding treasury bonds is expected to reach around 59 trillion won in the fourth quarter.

The Ministry of Economy and Finance held the fourth meeting of its bond issuance agency consultative body on Tuesday, reviewing third-quarter issuance results and fourth-quarter issuance plans.

The government used surplus tax revenue to trim this month's treasury bond issuance by 5 trillion won from its initial plan and said it would consider cutting volumes further if market conditions warrant. Treasury bond issuance in the third quarter totaled 55.6 trillion won, bringing the cumulative total through the end of September to 179.7 trillion won. The remaining issuance volume for the fourth quarter stands at 44 trillion won.

The seven major public bond issuance agencies excluding treasury bonds are expected to issue around 59 trillion won in the fourth quarter. The agencies will proceed with planned issuances while spreading out monthly volumes and maturities, adjusting issuance sizes flexibly based on funding needs and market conditions. If issuance volumes are expected to surge, the consultative body plans to coordinate the scale and timing on an ongoing basis.

Actual public bond issuance in the third quarter came in at around 65 trillion won, about 2 trillion won below the original management target of 67 trillion won.

The government also reviewed fourth-quarter supply and demand conditions for bank bonds with the five major commercial banks — Kookmin, Woori, Hana, Shinhan and Nonghyup. While the volume of bonds maturing in the fourth quarter is somewhat higher than last year, additional issuance demand is expected to ease as the banks have proactively secured funding in advance.

Hwang Sun-gwan, director general of the Treasury Bureau at the Ministry of Economy and Finance, said the market faces pressure over the supply of high-grade bonds, including treasury bonds, amid continued external uncertainty in the fourth quarter. "If necessary, we will consult and adjust issuance volumes and timing through ad hoc meetings," he said.