South Korea has returned to the international debt capital markets with a dual-currency offering worth US$1.45 billion, featuring the first euro-denominated bond sold by a non-European sovereign with a negative yield.

The deal included a US$625 million bond for 10 years, which was priced at 98.139% with a coupon of 1% to offer a yield of 1.198%. This was equivalent to a spread of 50bp over the US treasuries, which was in line with the final price guidance and 40bp tighter than the initial price range of 90bp area.

The other tranche was a 700 million euro (US$824 million) bond for five years, which was priced at 100.296% with a zero coupon and re-offer yield of -0.059%. It was the first time that a non-European sovereign sold euro-denominated bond with a negative yield. The final pricing represented a spread of 35bp over mid-swap, which was also in line with the final price guidance and 25bp inside the initial price range of 60bp area, which was later revised to between 40bp and 45bp.

Both tranches garnered strong investor demand with the 10-year bond attracting an order book of US$3.6 billion from 120 accounts. In terms of geographic distribution, 44% of the bond was allocated in EMEA, 38% in Asia and 18% in the US. Central banks, sovereign wealth funds and public institutions were the biggest buyers with 32%, followed by banks with 27%, asset and fund managers 25%, insurance companies and pension funds 15%, and private banks and other investors 1%.

The euro tranche generated a bigger demand of 5.5 billion euros from 198 accounts, with 90% distributed in EMEA and the remaining 10% in other jurisdictions. Asset and fund managers accounted for 51% of the bond; banks, private banks and wealth managers 25%; official institutions 19%, insurance companies and pension funds 3% and other investors 2%.

Net proceeds from bond issuance will become part of the country's foreign exchange stabilization fund. Bank of America Securities, BNP Paribas, Citi, J.P. Morgan, Mirae Asset Daewoo and Standard Chartered were the joint bookrunners for the transaction.

The sovereign previously accessed the US dollar bond market in June 2019, in which it raised a total of US$1.5 billion, including US$500 million in green and sustainability bonds. The other US$1 billion was raised also for foreign exchange stabilization purposes.