Bank of Korea Launches Simple Purchase of 2 Trillion Won in Government Bonds Amid Sharp Rise in Treasury Bond Yields (Update)

"Market Stabilization Measures Responding to Increased Interest Rate Volatility"

[Asia Economy Reporter Seo So-jeong] As government bond yields surged, the Bank of Korea (BOK) will conduct simple purchases of government bonds to respond to the increased volatility in interest rates.

On the 4th, the BOK announced, "As a market stabilization measure in response to the increased volatility in interest rates, we will carry out simple purchases of government bonds worth 2 trillion won," adding, "Bidding is scheduled to begin on the 7th."

The securities targeted for purchase include ▲20-year government bonds (8-2, maturity date March 10, 2028) ▲10-year government bonds (21-11, maturity date December 10, 2031) ▲10-year government bonds (20-4, maturity date June 10, 2030) ▲5-year government bonds (21-7, maturity date September 10, 2026) ▲3-year government bonds (21-4, maturity date June 10, 2024), covering 3-year, 5-year, 10-year, and 20-year maturities.

A BOK official said, "Although 2 trillion won is not a large amount, it is a level that can provide reassurance to the market," and added, "We expect this simple purchase measure to contribute to easing market interest rate volatility."

On the same day in the Seoul bond market, the 10-year government bond yield surged by 5.3 basis points (bp = 0.01 percentage points) from the previous trading day to close at 2.619% per annum. This is the highest level in about 3 years and 8 months since June 2018 (2.620%). The 3-year bond yield rose by 3.6 bp to 2.194% per annum, and the 5-year bond yield also increased by 4.5 bp to 2.418%, showing a broad upward trend.

The sharp rise in government bond yields on this day is interpreted as a result of hawkish moves by European central banks. The Bank of England (BOE) raised its benchmark interest rate by 0.25 percentage points yesterday, following an increase last December after about three years. On the same day, the European Central Bank (ECB) kept its benchmark interest rate at 0%, but the possibility of rate hikes in the second half of this year influenced the rise in government bond yields.

On the 14th of last month, BOK Governor Lee Ju-yeol said at a press conference following the Monetary Policy Committee regular meeting, "If the volatility of market interest rates increases due to the issuance of deficit government bonds, the Bank of Korea will also make efforts to stabilize the market, including simple purchases of government bonds."

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