Press Release

MINISTRY OF STRATEGY AND FINANCE

Embargo: 17:30, January 18, 2012 Release Date: 15:00, January 18, 2012

Contact Information: SangHyun Kwak : 02-2150-5132 (Government Bond Policy Division)

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<2012 Treasury Bond Issuance Plan>

The Ministry of Strategy and Finance plans to issue Korea Treasury Bonds worth KRW 79.8 trillion in 2012, or KRW 1.5 trillion less than the KRW 81.3 trillion worth of bonds issued in 2011.

KRW 25 trillion out of the total issuance, the net increase, is aimed at financing (KRW 13.8 trillion of deficit-covering bonds), and KRW 54.8 trillion is for refunding including redemption at maturity.

< New Steps>

The Ministry plans to issue 30-year KTB to develop the long-term financial market and lay the foundation for stable financing, starting from September 2012.

30-year KTBs worth KRW 400 billion per month are scheduled to be issued in the early stage by forming a syndicate.

- The extended structure of sovereign debt enables easy management of the conversion risk, which is expected to improve Korea’s creditworthiness in the international financial market.

To diversify the investment base, measures will be implemented to revitalize individual investment in KTBs that has been stagnant.

The bidding price has been lowered from KRW 1 million to KRW 0.1 million per unit for individuals, who are now allowed to participate in Inflation-linked Korean Treasury Bond (KTBi) auctions.

Tax incentives, such as exemption of interest income, are being considered for long-term individual investors in KTBs.

Press Release

MINISTRY OF STRATEGY AND FINANCE

The current KTB ETFs, such as the Leverage KTB ETF, are diversified to induce development and release of those instruments.

→ The volatility of the interest rate will be eased by the diversification of the demand structure. This will, in turn, provide individual investors with useful ways of saving to prepare for old age.

Conversion issuance has been formalized and the term of fungible issuance has been extended from 1 year to 2 years to improve KTBi liquidity, as the distribution market is not fully developed.

→ The revitalization of KTBi trading is expected to enhance its role as an objective indicator of the expected inflation rate.

<Continuing Steps>

The monthly issuance balance is being maintained to prevent volatility of the interest rate due to imbalance of supply and demand.

However, the issuance volume can be modified flexibly in consideration of fiscal expenditure such as early execution of the budget.

The Ministry continues to push to optimize the proportion of long-term KTB issuance, which can be adjusted flexibly in accordance with the market demand.

Early redemption is carried out by using idle cash* to ease the refinancing risk caused by the maturity of a large amount of bonds.

* such as the decrease of deficit-covering bonds due to increase in tax income, surplus in the government budget account, etc.

The database of the Financial Information Management System (FIMS) is being expanded and foreign investment information is being released on the KTB website.

The risk management system of KTB issuance has been systematically improved* by enhancing the simulation system for KTB issuance.

*The simulation period has been expanded to 20 years, and a stress test function has been added.

※ Further details will be released soon.