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South Korea expands corporate bond-buying program on credit crunch fears

SEOUL (Reuters) – South Korea’s government will expand its corporate bond-buying program and other liquidity-supply measures amid growing concerns about a credit crunch in bond and short-term money markets.

The government will double the ceiling on the corporate bond purchase facility operated by state-owned banks to trillion won ($16 billion), Economy and Finance Minister Choo Kyung-ho said on Sunday. Choo said after a meeting with senior financial officials, including the central bank governor and supervisory head.

Commercial paper issued by securities companies will be included in the purchase list of the facility, while Korea Securities Finance Corporation will provide an additional 3 trillion won of liquidity to securities companies facing liquidity shortages, he said. Said.

Bank of Korea Governor Lee Chang-yong said the Bank of Korea’s monetary policy committee will also consider taking its own measures, such as relaunching a special purpose vehicle to buy companies that were first launched during the pandemic Bonds and Commercial Paper.

But the premise of macroeconomic monetary policy has not changed because the issue is temporary and unique to the commercial paper market, he said.

There are growing concerns about signs of stress in South Korea’s short-term money market, with the central bank raising its policy rate from a record 0.5% since last August 250 basis points to curb inflation.

125 Official Closing Yield – Friday Commercial Paper from 1. at the beginning of the year )% to 4.48%, and the spread of the central bank’s policy rate widened from 48 basis points to 125 basis points.

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

In addition, the Korea Bond Market Stabilization Fund will resume purchasing corporate bonds and commercial paper worth up to 1.6 trillion won from Monday.

($1=1,428.3200 won)

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