|
SEOUL - SOUTH Korea's central bank on Monday said it would purchase government bonds worth more than US$700 million (S$1.07 billion) from banks and financial institutions to stabilise the local debt market.
The Bank of Korea said it would buy one trillion won (S$1.08 billion) in treasury bonds on Wednesday.
The bank said in a statement the move aims 'to calm the debt market and increase its holdings of state bonds for repurchase agreement operations' where the bank sells or buys bonds to control liquidity in the market.
Before the announcement, a senior central bank official warned against recently 'one-sided' bond market movements and vowed to continue to pump in more liquidity via open-market operations if necessary.
'Fresh liquidity will flow into the financial system following (the bank's move),' Mr Seo Chul-Su, an analyst at Daewoo Securities, told Dow Jones Newswires.
'Players will welcome such a decision as it's direct liquidity injection... and it's meaningful since it confirmed its stance is in line with market expectations.'
The country's financial watchdog announced last week a government plan to set up a fund of about 10 trillion won to stabilise the bond market and ease a corporate funding squeeze.
But the envisioned creation of the fund, which may increase the supply of treasury bonds in the market, prompted bond prices to tumble last week.
Bond prices closed higher on Monday on the central bank's announcement. -- AFP
| 
