3-Year Korean Treasury Bond Surpasses 2.1%... Bank of Korea to Reduce Monetary Stabilization Bond Issuance (Comprehensive)

3-Year Government Bond Yield at 2.140% on the 22nd
BOK Reduces Monetary Stabilization Bonds by 2.4 Trillion Won

[Asia Economy Reporter Jang Sehee] The Bank of Korea has decided to reduce the issuance volume of Monetary Stabilization Bonds to curb soaring market interest rates.

At 10:22 a.m. on the 28th in the Seoul bond market, the 3-year maturity government bond yield was trading at an annual rate of 2.140%, up 0.096 percentage points from the previous trading day. This is the first time in three years since June 25, 2018 (2.143%) that it has exceeded the 2.1% level. The previous day, the 3-year maturity government bond yield closed at 2.044%, up 0.097 percentage points from the previous day, setting a new yearly high once again.

As volatility in the bond market increased, the Bank of Korea announced that it would reduce the issuance amount of Monetary Stabilization Bonds in November by 2.4 trillion won compared to the previous month and increase the early redemption amount by 1 trillion won. The competitive bidding issuance volume of Monetary Stabilization Bonds next month will be 6.6 trillion won. Monetary Stabilization Bonds are bonds issued by the Bank of Korea to control the money supply in the market. Reducing the issuance volume of these bonds decreases the supply of bonds, which causes their prices to rise (and bond yields to fall).

By maturity, the 91-day bonds will decrease from 1 trillion won per issuance to 700 to 800 billion won, and the 1-year bonds will decrease from 1.2 trillion won to 700 billion won. Additionally, the 2-year bonds will be reduced from 2.5 trillion won to 1.8 trillion won, and the 3-year bonds will be cut from 1.3 trillion won to 1 trillion won.

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