SEOUL– The Bank of Korea (BOK) said Tuesday its bond-buying plan is not intended to support the government’s extra budget spending but to stabilize the bond market.
In a meeting with Finance Minister Hong Nam-ki on Friday, BOK Gov. Lee Ju-yeol said the central bank will buy Treasury bonds in a timely manner to ease market volatility. Earlier, the BOK bought state bonds worth 2 trillion won (US$1.7 billion) to ease fast rising yields in the bond market.
The move came despite the BOK’s recent rate hikes and caused speculation it might be intended to finance the government’s extra budget spending.
The government recently proposed an extra budget of 14 trillion won to support the pandemic-hit merchants, most of which will be financed through bond issuance.
“We have no plan to support the government’s extra budget spending through our bond-buying,” the BOK said in a statement.
The BOK added Lee’s recent remarks underlined the central bank’s stance to stay ready to take market stabilization measures in case Treasury bond yields show sharp volatility.
Yields of government bonds have been on the rise recently amid expectations for an increase in bond selling and the central bank’s push for additional rate hikes to tame inflation.
Returns on three-year Treasury bonds rose 0.4 basis points to 2.347 percent Monday, the highest in more than seven years.
The BOK did not provide information on when and how many state bonds it will buy going forward.
Source: Yonhap News Agency