The government will cut its October issuance of treasury bonds by 5 trillion won ($3.5 billion) from its original plan, drawing on excess tax revenue generated by a semiconductor boom. The move aims to calm treasury bond yields, which have remained elevated in recent weeks. The government will also expand early bond redemptions, known as buybacks, to 3.5 trillion won and is reviewing additional issuance cuts depending on market conditions.
The Ministry of Finance and Economy released its October 2026 issuance plan for treasury bonds, financing bills and won-denominated foreign exchange stabilization bonds on the 1st, saying it would reduce this month's treasury bond issuance by 5 trillion won from the previous plan.
The reduction will be funded by excess tax revenue, which has risen sharply on the back of the semiconductor boom. The government has revised its estimate for this year's national tax revenue upward by 63.2 trillion won from the level assumed in the supplementary budget. By using the surplus to cover financing needs originally slated for bond sales, the government is reducing the supply of newly issued debt by the same amount.
Of the October total, 12 trillion won will be sold through competitive bidding involving primary dealers, with another 500 billion won issued via exchange offers. Looking at competitive bidding alone, the figure is 4 trillion won lower than September's 16 trillion won. The final amount may vary depending on non-competitive purchases by primary dealers and retail investors.
By maturity, competitive bidding will cover 2.1 trillion won of two-year notes, 2.4 trillion won of three-year notes, 2.2 trillion won of five-year notes and 2.1 trillion won of 10-year notes. Issuance will total 700 billion won for 20-year bonds, 1.8 trillion won for 30-year bonds and 600 billion won for 50-year bonds, along with 100 billion won of inflation-linked treasury bonds.
The government is also scaling up early redemptions. It plans to buy back a combined 3.5 trillion won of off-the-run two-, three-, five- and 10-year issues, up 2 trillion won from 1.5 trillion won last month. Pairing smaller new issuance with larger buybacks is intended to ease supply-demand pressure in the bond market.
The government had previously signaled it would use part of the excess tax revenue to trim bond issuance after domestic treasury yields stayed high, partly reflecting rising rates in major economies. "We will closely monitor trends in the treasury bond market and implement necessary market stabilization measures, including emergency buybacks and reductions in bond issuance using part of the excess tax revenue," Deputy Prime Minister and Finance and Economy Minister Lee Hyoung-il said at an expanded macroeconomic and financial meeting on the 30th of last month.
The ministry said on the same day that it "plans to monitor market conditions going forward and review additional reductions in bond issuance if necessary."
Meanwhile, Financial Services Commission Chairman Lee Eok-won convened a meeting to review financial market conditions and instructed officials to "maintain an active stance in executing market stabilization programs to steady the bond and funding markets, given that the rise in market rates is continuing, and to prepare thoroughly in advance so that support can be expanded swiftly if volatility in the bond market widens excessively."
Treasury bond yields fell on the day, led by short- and medium-term maturities. The final quoted yield on three-year treasury bonds stood at 4.010%, down 0.1 basis point from the previous session. One basis point equals 0.01 percentage point.
