South Korea expands corporate bond-buying program amid credit crunch concern

SEOUL, Oct 23 (Reuters) – South Korea’s authorities will develop its company bond-buying program amongst different liquidity provide measures amid rising worries a few credit score crunch in bond and short-term cash markets.

The federal government will double the ceiling of its company bond-buying facility run by state-run banks to 16 trillion gained ($11 billion), Minister of Financial system and Finance Choo Kyung-ho mentioned on Sunday.

The measure is aimed toward easing volatility and concern of tight liquidity in company bond and short-term cash markets, Choo mentioned after a gathering with prime monetary officers, together with the central financial institution governor and regulatory chief.

Business paper issued by securities corporations can be included within the facility’s buy listing, whereas an extra 3 trillion gained of liquidity can be provided by the Korea Securities Finance Corp (KSECF.UL) for securities corporations experiencing liquidity shortages, he mentioned.

The Financial institution of Korea’s financial coverage board will even take into account its personal measures, akin to reactivating a particular goal automobile to buy company bonds and business paper first launched in the course of the pandemic, Governor Rhee Chang-yong instructed reporters.

However premises to macroeconomic financial coverage are unchanged as this challenge is short-term and specific to the business paper market, he mentioned.

There have been rising worries about indicators of stress in South Korea’s short-term cash market, with the central financial institution having raised its coverage rate of interest (KROCRT=ECI) by 250 foundation factors since August final yr from a record-low 0.5% to include inflation.

The official end-of-day yield on 91-day business paper rose to 4.25% on Friday from 1.55% firstly of the yr, with the unfold over the central financial institution’s coverage charge (KROCRT=ECI) widening to 125 foundation factors from 48 foundation factors over the identical interval.

To assist allay the scenario, the Monetary Companies Fee on Thursday mentioned it might delay by six months a plan to normalise necessities for banks to carry extra liquid belongings. learn extra

Additionally, South Korea’s bond market stabilisation fund will resume shopping for company bonds and business paper price as much as 1.6 trillion gained from Monday.

($1 = 1,428.3200 gained)

Reporting by Jihoon Lee and Choonsik Yoo; Enhancing by Christopher Cushing and William Mallard

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