South Korea Weighs Further Treasury Bond Issuance Cuts as Rates Stay High

South Korea may further reduce government bond issuance if elevated interest rates continue to strain financial markets, Finance Minister Lee Hyoung-il said Friday, signaling that policymakers are prepared to limit supply beyond an already announced cut for October.

The government has reduced planned Treasury bond issuance this month by 5 trillion won, or about $3.64 billion. Officials have also said they are ready to deploy market-stabilization measures, including emergency bond buybacks, if conditions warrant. The steps are intended to ease pressure in the bond market as high yields raise borrowing and refinancing costs across the economy.

Lee said the government would continue monitoring the market closely with relevant agencies. He warned that a prolonged period of high interest rates could place a heavier refinancing burden on companies with lower credit ratings, which generally face higher funding costs and more limited access to capital than stronger borrowers.

The remarks came during a meeting with Bank of Korea Governor Shin Hyun-song, Financial Services Commission Chairman Lee Eog-weon, Financial Supervisory Service Governor Lee Chan-jin and Land Minister Hong Jee-sun. It was the first such gathering since Lee took office as finance minister last month, bringing together the country’s fiscal, monetary, financial regulatory and housing authorities.

The meeting also addressed housing-market conditions. Lee noted that the pace of apartment price increases in Seoul had slowed for five consecutive weeks, while prices outside the affluent Gangnam area were still rising. The government plans to keep watching those divergent trends as it assesses financial stability and household borrowing risks.

Policymakers also discussed efforts to expand the international use of the Korean won. Lee said the government would soon announce measures to ease related regulations, although he did not provide details of the planned changes.

The possible issuance cuts show how the government is using debt-management policy to respond to higher market rates. Reducing the amount of new bonds offered can help ease supply pressure, while emergency buybacks can provide support during periods of market stress. Any additional action, however, will depend on how yields, corporate funding conditions and broader financial markets develop. Officials said those conditions will remain under close review.