SEOUL– Major banks in South Korea have promised to minimize the amount of their bond sale as part of efforts to help stabilize the debt and short-term money markets reeling from the Legoland turmoil, financial authorities said Wednesday.
Five banks — KB Kookmin, Shinhan, Hana, Woori and Nonghyup — also promised to buy commercial paper and other short-term bonds amid the government’s ongoing debt market stabilization efforts, according to the Financial Services Commission (FSC).
The decisions were made at their meeting with the FSC and the Financial Supervisory Service earlier in the day. The meeting was the second of its kind intended to discuss market conditions following the first one last week.
The local corporate bond market has been wobbling in the wake of a default on municipal government-guaranteed debt raised for the construction of the Legoland theme park.
The failure of debt payment has sent corporate bond yields soaring, making it harder for businesses to borrow money. Bond yields and prices move in opposition directions.
On Sunday, the government announced a set of measures to inject an additional 50 trillion won (US$35 billion) into the debt market.
The measures include tapping into a 20 trillion-won bond stabilization fund and the doubling of the ceiling of state-run banks’ corporate bond buying to 16 trillion won, a move aimed at supplying liquidity and capping market interest rates.
Source: Yonhap News Agency