South Korea's credit default swap(CDS) premium, which reflects the risk of sovereign debt default, has plunged to the lowest level in over 12 years amid signs the U.S.-China trade dispute may ease.

According to the Finance Ministry on Friday, the CDS premium on five-year foreign currency bonds issued by the government stood at 25 basis points on Thursday, the lowest figure since October 29, 2007 when it also reached 25 basis points. 

The CDS is a financial derivative that guarantees a return of principal investment even when the company or government that issued the bond goes bankrupt. 

The CDS premium indicates the default risk of a state or corporation. The lower the figure, the lower the risk.

The nation’s CDS premium had reached 36 basis points last year following improved inter-Korean relations and fluctuated before standing at 27 basis points last month after the U.S. and China reached an agreement in principle on the first phase of a trade deal.