SEOUL, Sept. 8 (Yonhap) — The Bank of Korea (BOK) said Tuesday it plans to buy state bonds worth 5 trillion won (US$4.2 billion) directly from the market by the end of this year in a bid to stabilize the debt market.
The move is aimed at tackling potential market jitters and easing a sharp rise in market rates in a preemptive manner as the government is expected to increase bond issuance, the BOK said in a statement.
The government plans to sell more bonds to finance the fourth extra budget designed to cushion the fallout from the COVID-19 pandemic.
The finance ministry is expected to submit a supplementary budget worth more than 7 trillion won to the National Assembly soon to provide support for those hit hard by the virus outbreak.
An increase in bond supply jacks up bond yields, raising market instability.
The BOK said it will carry out state bond purchases by taking into account the market situation.
The central bank also plans to take other measures to stabilize financial markets if market rates sharply rise.