South Korean treasury bonds issued at interest rates of 3% or lower and maturing within the next four years through 2030 total 241 trillion won ($169 billion), according to a tally obtained by Seoul Economic Daily. With global interest rates elevated, the government faces mounting refinancing costs as debt borrowed cheaply in the past must be rolled over at higher rates.
An analysis by Seoul Economic Daily of data titled "Status of All Treasury Bond Issues Maturing Between 2027 and 2030," submitted by the Ministry of Finance and Economy to People Power Party lawmakers Park Soo-young and Bae Joon-young, showed that 406.3 trillion won in treasury bonds will come due over that period, the newspaper reported on the 16th.
Of that total, 240.7 trillion won, or 59.2%, was issued at winning bid rates below 3%. Widening the range to below 4% brings the figure to 362.5 trillion won, or 89.2% of the total.
Treasury bonds raised at rates 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.
For the 110.7 trillion won in treasury bonds maturing next year, the weighted average winning bid rate at issuance was 2.97%. Applying market rates for each maturity as of the Oct. 15 close to bonds of the same tenor lifts the weighted average to about 3.97%, a rise of 1 percentage point. Assuming the entire maturing amount is refinanced, annual funding costs would increase by roughly 1.12 trillion won. Estimated on the same basis, the annual increase in funding costs would be about 970 billion won in 2028, about 880 billion won in 2029 and about 1.48 trillion won in 2030.
The concern is that refinancing costs could climb further if market rates rise above current levels. According to a document titled "Treasury Bond Interest Cost Outlook for 2027-2030," submitted by the ministry to Park, the government applied a budget planning rate of 4.1% for 2027 and projected that treasury bond interest costs would 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, stressed that "if tax revenues came in higher, the principle is to first pay down existing debt that is coming due."