Bank of Korea's Simple Purchase of 1.5 Trillion KRW in Government Bonds... 3.5 Trillion KRW Bids

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] The Bank of Korea has purchased an additional 1.5 trillion won worth of government bonds. This is the third purchase this year.

On the 2nd, the Bank of Korea announced that the entire planned purchase amount (1.5 trillion won) was successfully bid in the simple competitive bidding for government bonds. A total of 3.55 trillion won was bid. A Bank of Korea official stated, "We simply purchased government bonds to improve the supply and demand of government bonds and to expand the bonds available for sale under repurchase agreements (RP)."

The Bank of Korea absorbs liquidity from the market by selling bonds it holds as collateral to institutions and receiving cash. To secure bonds to be provided as collateral, it frequently makes simple purchases of government bonds. On this day, the Bank of Korea purchased government bonds through electronic competitive bidding via the Bank of Korea Financial Network.

The Bank of Korea clarified that this government bond purchase is a simple purchase and is not intended to prepare for an increase in government bond issuance for the third supplementary budget. In particular, since the recent government bond interest rates have not risen above the 1.40% level, the impact from the supplementary budget is not yet significant.

However, a Bank of Korea official added, "If government bond issuance is concentrated at a certain point in time causing excessive market burden or increased interest rate volatility, additional simple purchases may be made." This aligns with the stance consistently expressed by Bank of Korea Governor Lee Ju-yeol. Market experts believe that the Bank of Korea will not engage in large-scale government bond purchases until the 10-year government bond yield rises to around 1.50%.

Meanwhile, in the bond market today, government bond yields are showing a slight decline following the Bank of Korea's additional purchase. As of 10:20 a.m., the 10-year government bond yield is trading at 1.383%, down 2.3 basis points (1bp = 0.01 percentage points) from the previous day.

This content was produced with the assistance of AI translation services.