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KOFR vs Korea’s CD rate: what each benchmark measures
KOFR reflects secured overnight repo transactions in Korean won. Korea’s CD benchmark is based on yields of bank-issued 91-day certificates of deposit. When you compare them, start with the instrument and its maturity: an overnight funding rate and a 91-day benchmark describe different borrowing periods. [1][2]
The dates matter too. A KOFR figure published in the morning refers to the previous business day. And a plan to remove the CD rate’s critical-benchmark designation should not be read as an announcement that CD publication will stop. [1][2]
KOFR and the CD benchmark at a glance
KOFR stands for Korea Overnight Financing Repo Rate. Its underlying transactions are overnight, over-the-counter repurchase agreements, or repos, in Korean won. They are secured by government bonds and monetary stabilization bonds. [1]
The CD benchmark uses yields of bank-issued 91-day CDs, as described by the Financial Services Commission (FSC) in its 30 March 2026 announcement. That definition identifies this benchmark’s maturity; it does not mean every certificate of deposit has a 91-day term. [2]
| What to identify | KOFR | CD benchmark discussed here |
|---|---|---|
| Underlying instrument | Korean-won overnight OTC repo transactions | Bank-issued certificates of deposit |
| Maturity | Overnight | 91 days |
| Measurement basis | Transaction-amount-weighted average after trimming the high- and low-rate tails | Yields of bank-issued 91-day CDs |
This makes the comparison useful when reading benchmark-reform news. First establish which rate the report means, then check its observation date. A difference between two quoted numbers, by itself, does not tell you that monetary policy changed or that one product offers a better return.
How KOFR is calculated and published
The Bank of Korea describes a three-step calculation: [1]
- Arrange the eligible repo transactions by interest rate.
- Remove 5% of the total transaction amount from the highest-rate end and 5% from the lowest-rate end.
- Calculate an average of the remaining rates, weighted by their transaction amounts.
The 5% is a share of the transaction amount, not a share of the number of trades. The two tails together account for 10% of the total amount. This distinction matters because trades can have different sizes; simply dropping the same percentage of trade records would describe a different method. [1]
The Korea Securities Depository (KSD) calculates KOFR and publishes the previous business day’s figure by 11:00 each business day. [1]
- Observation day: the previous business day’s eligible repo transactions.
- Publication day: KSD publishes the resulting KOFR by 11:00 in the morning.
When you copy a KOFR figure from a report, keep the observation date with it. A page’s publication date alone is not enough to identify the day measured by the rate.
What the March 2026 CD reform plan said
In its announcement dated 30 March 2026, the FSC set out a plan to remove the CD rate’s critical-benchmark designation at the end of 2030. The announcement also said CD rate publication was to continue for the time being. [2]
These statements concern two different things: the benchmark’s designation and the continued publication of its value. The planned designation change was not an announcement that CD publication would end in 2030.
When reading a later headline about that plan, check:
- What is changing? Distinguish the designation from the publication of the rate.
- When was it announced? Keep 30 March 2026 attached to this plan.
- What date was proposed? End-2030 was the planned timing for the designation change.
- Does the report describe a plan or a completed change? The March announcement establishes the plan, not its eventual implementation.
Check later announcements for updates to the plan.
Keep the policy rate and product returns separate
The Bank of Korea’s Monetary Policy Board decides the BOK Base Rate. KOFR, by contrast, is calculated from the market transactions described above. [3]
So, before treating a news item as a policy-rate decision, identify the rate it names. Likewise, an overnight benchmark observation or a 91-day CD benchmark quotation is not enough to determine the return on an ETF, deposit or other product.
A quick checklist for reading a rate report
Before comparing KOFR with a CD figure, note these six items:
- Exact name: KOFR or the specified CD benchmark, rather than a loosely labelled “Korean interest rate.”
- Instrument: secured repo transactions or bank-issued CDs.
- Maturity: overnight or 91 days for this comparison.
- Observation date: the day the quoted rate measures.
- Publication date: when the figure or report appeared; for KOFR, keep the previous-business-day rule in view.
- Statement type: a rate observation, a policy decision or an announced reform plan.
Those details let you separate a change in a published rate from a change in how a benchmark is designated. If a report leaves them out, check its official source before drawing a conclusion.
Frequently asked questions
Does “risk-free reference rate” mean a KOFR-linked product cannot lose money?
No. KOFR’s reference-rate label describes the benchmark. It does not guarantee the principal or return of a product that refers to it. The Bank of Korea explains KOFR using transactions chosen to approximate a risk-free rate. [1]
Does every Korean CD have a 91-day maturity?
No. The 91-day description here applies to the bank-issued CDs underlying the benchmark identified in the FSC announcement. It is not a definition of every CD. [2]
Did the FSC announce that CD rate publication would stop in 2030?
No. Its 30 March 2026 announcement planned removal of the CD rate’s critical-benchmark designation at the end of 2030, while saying publication was to continue for the time being. Keep the planned designation change separate from publication. [2]
Sources
- Bank of Korea, KOFR overview in Korean, with the English overview. Instrument, collateral, calculation and publication schedule; checked 25 October 2026.
- Financial Services Commission, benchmark-reform announcement, 30 March 2026 (Korean). CD benchmark definition and the dated designation/publication plan; checked 25 October 2026.
- Bank of Korea, KOFR FAQ in English, with the Korean FAQ. Policy-rate distinction; checked 25 October 2026.
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