South Korean treasury bonds issued during the era of low interest rates begin maturing in large volumes from next year, forcing the government to rethink its fiscal strategy. With global borrowing costs elevated, debt raised cheaply must now be refinanced at higher rates. Analysts say the government must get ahead of a double burden: rising rollover costs on existing debt at a time when net new issuance of treasury bonds approaches 100 trillion won a year.
An analysis by The Seoul Economic Daily on the 17th of data on all treasury bonds maturing between 2027 and 2030, submitted by the Ministry of Finance and Economy to lawmakers Park Soo-young and Bae Joon-young of the People Power Party, showed maturities totaling 406.3 trillion won over the period.
Of that amount, 240.7 trillion won, or 59.2% of the total, was issued at winning bid yields below 3%. Widening the range to below 4% brings the figure to 362.5 trillion won, or 89.2%.
Bonds issued at yields below 3% mature as follows: 76.3 trillion won in 2027, 55.8 trillion won in 2028, 38.7 trillion won in 2029 and 69.9 trillion won in 2030.
The 110.7 trillion won of treasury bonds maturing next year carried a weighted average winning bid yield of 2.97% at issuance. Applying market yields as of the Oct. 15 close to bonds of the same maturity brings the weighted average to about 3.97%, a rise of 1 percentage point. Assuming all maturing bonds are rolled over, annual funding costs would increase by roughly 1.12 trillion won. The same method yields increases of about 970 billion won in 2028, about 880 billion won in 2029 and about 1.48 trillion won in 2030.
The risk is that costs climb further if market yields rise above current levels. According to a projection of treasury bond interest costs for 2027 through 2030 that the ministry submitted to Park, the government, applying a budget planning rate of 4.1% for 2027, expects interest costs to rise from 40.4 trillion won next year to 51.1 trillion won in 2030. Yang Joon-mo, a professor of economics at Yonsei University, said that when tax revenue comes in above target, the principle is to pay down maturing debt first.
110 Trillion Won Maturing Next Year Was Raised at 2.97%, With Rollover Costs Set to Rise by More Than 1 Trillion Won
The Low-Rate Debt Comes Back
Interest Costs to Rise 10.7 Trillion Won by 2030
Government Says Debt Level Low Enough to Absorb the Increase
Experts Call for Pre-emptive Risk Management
According to the data on all treasury bonds maturing between 2027 and 2030 that the Ministry of Finance and Economy submitted to Park and Bae, bonds maturing in 2030 carried an average winning bid yield of 2.44% at issuance, below the 3.19% average for bonds maturing in 2028. The weighted average winning bid yields were just 1.58% on 28.3 trillion won of 10-year bonds maturing in 2029 and 1.66% on 40.9 trillion won of 10-year bonds maturing in 2030. In other words, 69.1 trillion won of 10-year debt maturing in those two years was raised at an average of around 1.6%. Bonds whose individual winning bid yields were actually in the 1% range total 63.3 trillion won.
Applying market yields as of Oct. 15 to the bonds maturing each year through 2030 and assuming they are rolled over into the same maturities, the increase in funding costs is estimated at 1.117 trillion won in 2027, 972 billion won in 2028, 876 billion won in 2029 and 1.477 trillion won in 2030. Maturities in 2030 total 89.1 trillion won, about 40 trillion won less than in 2028, yet the increase in funding costs from refinancing is projected to be larger.
Rollovers are not the only issue. Total planned treasury bond issuance for next year is 222.8 trillion won. Of that, 126.6 trillion won is refinancing issuance for redemptions and market-making, while net new issuance that adds to outstanding government debt comes to 96.3 trillion won. The net figure is 13.1 trillion won smaller than this year but still close to 100 trillion won. The structure means debt raised cheaply in the past is being swapped into higher-yielding debt while newly accumulated debt also costs more than it did during the low-rate years.
Applying the 4.1% budget planning rate for 2027, the government projects treasury bond interest costs to rise by 10.7 trillion won, from 40.4 trillion won next year to 51.1 trillion won in 2030.
Abroad, the same dynamic has already become a major constraint on fiscal management. According to a global debt report released by the Organisation for Economic Co-operation and Development in March, government interest spending among member countries equaled 3.3% of gross domestic product in 2025, near the 3.4% peak of the past decade. Bonds issued during the low-rate period are being refinanced at higher yields, and large new funding needs are compounding the pressure, keeping interest burdens elevated.
The United States is the clearest case. In a budget outlook released in February, the Congressional Budget Office projected that net federal interest spending would more than double, from $1 trillion in 2026 to $2.1 trillion in 2036. About half of the increase, the CBO found, would stem from a rise in the average interest rate applied to government debt. In Britain, debt interest spending in the 2025-26 fiscal year came to about 109 billion pounds, or 8% of total public spending. The more interest costs expand, the less fiscal room remains for other policies.
The government, for its part, sees little chance that the rollover burden will escalate into a fiscal crisis. Hwang Soon-kwan, head of the ministry's treasury bureau, said that interest costs alone could rise because rates are higher than in the past, but stressed that South Korea's overall debt level is markedly lower than that of other advanced economies, leaving risk management entirely manageable even as interest costs increase. Still, the environment has changed: debt accumulated during the low-rate years is being replaced with more expensive debt while new debt is also being piled up at higher rates.
Experts say the pace of the increase in interest costs should be managed pre-emptively, through steps such as using surplus tax revenue to reduce government debt and adjusting the volume and maturity structure of treasury bond issuance. Woo Suk-jin, a professor of economics at Myongji University, said adjusting issuance volumes and conducting buybacks are worth considering as responses, adding that using surplus tax revenue to redeem bonds is part of the same approach.
The government plans to use a future response fund next year to cut net treasury bond issuance by 12.5 trillion won. How much further it trims year-end issuance using this year's surplus tax revenue is another variable that could lower future interest costs. An official at the Ministry of Finance and Economy said reducing issuance volumes would be welcome but that next year's volumes are already reflected in the budget bill, with any adjustment to be decided during parliamentary deliberations.
