* S.Korea to issue its first 50-year bond on Oct 11
* Spread for 50-year bond to be 4 bps over 10-yr notes
* Amount of issuance is 1.1 trillion won
(Adds analyst comment, details on bond issuance)
By Cynthia Kim
SEOUL, Sept 30 The premium for holding South
Korea's first 50-year treasury bonds will only be 4 basis points
over benchmark 10-year notes, the nation's finance ministry said
on Friday, indicating strong demand for "super long" bonds.
The ministry said the one-off sale of 1.1 trillion won
($1.00 billion) worth of the nation's longest-ever maturity
bonds will take place on Oct. 11. The final yield will be 4
basis points plus the average yield for the benchmark 10-year
notes for the preceding three business days.
Investor demand for ultra-long securities has been rising as
aging populations and persistently low interest rates drive life
insurers and other yield-hungry investors towards longer-dated
notes. Negative interest rates in Japan and Europe are also
boosting investor appetite at the long end of the curve.
The planned issuance is unprecedented for Asia's
fourth-largest economy, where the longest existing maturity is
30 years, which it started issuing on a regular basis only in
South Korea's 10-year bonds yielded 1.456 percent as of
Thursday's close, according to the Korea Financial Investment
Given the small spread, the yield for the 50-year notes
could be similar to that for the 30-year notes, at 1.499 percent
as of end-Thursday.
Yoon Yeo-sam, a fixed income analyst at Mirae Asset Daewoo
Securities in Seoul, said the government was unlikely to issue
the super-long bonds on a regular basis, despite strong investor
"The government is worried about the extra burden it would
face once interest rates go up," Yoon said.
"Instead, the finance ministry may choose to issue the
50-year notes whenever they see the need."
South Korea's finance ministry said the issuance would help
boost government finances as social welfare costs are set to
rise with a population aging at the fastest pace among advanced
The extra yield investors demand to hold South Korea's
30-year bonds over 3-year notes was at 20 basis points as of
Thursday, narrowing from more than 90 basis points in Oct. 2013,
KOFIA data shows.
That also is smaller than in the United States, where
spreads for similar securities stand at 143 basis points as of
Since 2014, nine countries in the OECD group of rich nations
have sold securities with maturities of 50 years or longer,
including the United Kingdom, France and Switzerland, South
Korean finance ministry data shows.
China and Thailand have also issued 50-year debt. The
longest bond duration in Japan, where the fast-aging population
is shrinking, is 40 years.
($1 = 1,097.8300 won)
(Additional reporting by Christine Kim; Editing by Tony Munroe
& Shri Navaratnam)