SEOUL– South Korea plans to buy back 2 trillion won (US$1.4 billion) worth of government bonds this week in a bid to help tackle a sharp spike in bond yields, a senior government official said Wednesday.
The emergency buyback of Treasury bonds will be carried out on Friday, according to First Vice Finance Minister Bang Ki-sun.
Earlier in the day, the Bank of Korea announced a plan to purchase government bonds worth 3 trillion won from the market on Thursday in an effort to help stabilize the bond market.
Bond yields have recently spiked in the wake of the Federal Reserve’s decision last week to raise its policy rate by 75 basis points for a third time.
The yield on three-year Treasurys surged 34.9 basis points to 4.548 percent on Monday, the highest in nearly 13 years. The return on 10-year government bonds shot up 22.3 basis points to an over 11-year high of 4.335 percent. Bond prices move inversely to yields.
Bang said the government will “actively” consider measures to ease volatility in the stock and corporate bond markets if needed.
South Korea’s stocks tumbled and its currency suffered sharp weakness against the U.S. dollar amid growing worries that the Fed’s aggressive rate hikes could tip the U.S. economy to a recession.
Source: Yonhap News Agency