South Korea expands corporate bond-buying program

South Korea expands corporate bond-buying programĀ 

South Korea expands corporate bond-buying program

SEOUL (Reuters) - South Korea's government will expand its corporate bond-buying program among other liquidity supply measures amid growing concerns about a credit crisis in the bond and short-term money markets.South Korea expands corporate bond-buying programĀ 

Economy and Finance Minister Chu Kyung-ho said on Sunday that the government would increase the limit on the corporate bond-buying facility run by state-run banks to 16 trillion won ($11 billion).

After a meeting with top financial officials, including the central bank's governor and regulatory chief, Chu said the measure is aimed at easing concerns about volatility and tight liquidity in corporate bond and short-term money markets.

Commercial paper issued by securities firms will be included in the facility's purchase list, while an additional $3 trillion won liquidity will be supplied by Korea Securities Finance Corp for securities firms facing liquidity crunch, he said.

Governor Ri Chang-yong told reporters that the Bank of Korea's monetary policy board would also consider measures of its own, such as reactivating a special purpose vehicle for buying corporate bonds and those introduced for the first time during the pandemic. commercial paper.

But the bases of macroeconomic monetary policy remain unchanged as the issue is temporary and is exclusively for the commercial paper market, he said.

Concerns are rising about signs of tension in South Korea's short-term money market, with the central bank raising its policy interest rate by 250 basis points from a record-low 0.5% since August last year to control inflation.

The official day-end yield on the 91-day commercial paper rose to 4.25% on Friday from 1.55% at the start of the year, raising the central bank's policy rate by 48 basis points to 125 basis points. same period.

To help ease the situation, the Financial Services Commission said on Thursday it would delay by six months a plan to normalize requirements for banks to hold more liquid assets.

Also, South Korea's Bond Market Stabilization Fund will resume buying corporate bonds and commercial paper worth up to 1.6 trillion won from Monday.

($1 = 1,428.3200 won)

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