[Alpha Biz= Paul Lee] The Bank of Korea (BOK) announced on December 8 that it will purchase KRW 1.5 trillion worth of Treasury bonds on December 9 through a simple (outright) purchase operation. The purchases will cover 5-year, 10-year, and 20-year maturities.

The BOK stated that the operation is being conducted “in consideration of the need to expand the pool of securities eligible for repo (RP) sales,” indicating that the move is intended to replenish Treasury bonds maturing this month. Although the central bank did not explicitly cite “market stabilization” as the purpose, some analysts expect the operation to contribute to improved market sentiment.

BOK Governor Rhee Chang-yong previously said at a press briefing last month that, in response to sharp increases in market interest rates, “Given the revised RP framework, we may need to hold a certain level of Treasury bonds, and can respond flexibly as needed.” He added, “We will make decisions based on how far interest rates rise and how the market interprets the situation.”

This marks the first time in approximately three years and three months that the BOK has conducted an outright purchase of Treasury bonds, following a similar operation on September 29, 2022. At that time, amid consecutive declines in the stock market, financial authorities activated the Stabilization Fund for the securities market, while the Ministry of Economy and Finance carried out a KRW 2 trillion Treasury buyback and the BOK conducted a KRW 3 trillion outright purchase.

 

 

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