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Calls to swiftly adopt shorter maturities intensify
By Lee Yeon-woo
The first subscription round for retail treasury bonds in 2025 will begin on Monday. However, it remains unclear whether the financial product will see a surge in popularity this year, given its underwhelming sales performance in 2024.
From Monday to Wednesday, Mirae Asset Securities, the sole distributor designated by the government, will begin offering subscriptions for 80 billion won ($54.24 million) worth of 10-year bonds and 20 billion won worth of 20-year bonds.
The interest rates are 3.165 percent for the 10-year bonds and 3.25 percent for the 20-year bonds. These rates include a base coupon rate of 2.665 percent and 2.75 percent, respectively, with an added premium of 0.5 percent. Investors who hold these bonds to maturity can also benefit from annual compound interest.
In 2025, the total issuance of retail treasury bonds increased by 30 percent to 1.3 trillion won, signaling the government’s continued commitment to promoting the instruments.
Retail treasury bonds were first introduced last June as a way to help individuals build retirement assets, even with small investments. While government bonds have always been available to individuals, the typically high transaction amounts — often in the billions of won — have made them inaccessible for the average investor.
The primary advantage of these bonds lies in their high stability, as their repayment is backed by the state. However, contrary to market expectations, it struggled to attract buyers last year. Market watchers cited their long maturities and the declining policy rates as key factors behind this.
The 20-year bonds remained undersubscribed for six consecutive months following their launch, while the 10-year bonds failed to meet issuance targets for four straight months starting in September.
By the end of 2024, total issuances reached only 70 percent of the 1 trillion won issuance cap. In December, the finance ministry redirected 260 billion won worth of unsold bonds to institutional investors.
"Investors are hesitant because the 10- to 20-year investment periods feel excessively long, especially given current market volatility," an industry official said.
Unlike standard government bonds, retail treasury bonds cannot be sold before maturity. Additionally, they do not allow investors to realize capital gains from falling interest rates, which usually boost bond prices.
Industry insiders emphasize that with the bond market expected to remain challenging this year, the government should adopt a more proactive stance to stimulate sales. Foreign investors net sold about 3 trillion won worth of treasury bonds last December, following political instability tied to President Yoon Suk Yeol's martial law declaration.
The bonds have the potential to provide stable support for the government’s steadily growing fiscal policies, according to a report by Hwang Sei-woon, a senior research fellow at the Korea Capital Market Institute.
"Swiftly adopting a 5-year bond option could be an effective way to attract more subscriptions," the official added.
To boost the appeal of retail treasury bonds, the government announced plans to offer a 5-year bond option from this year. However, the issuance date has not yet been finalized.
English (United States) ·