SEOUL, Feb. 26 (Yonhap) — The Bank of Korea (BOK) said Friday it plans to purchase as much as 7 trillion won (US$6.2 billion) worth of government bonds in the first half of this year as it seeks to stabilize bond markets.
The plan is aimed at easing volatility of bond yields because the government’s issuance of bonds is expected to significantly increase, the BOK said in a statement.
The minimum size of the bond purchase plan will be 5 trillion won, the BOK said.
South Korea has increased sales of state debts to cushion the impact of the coronavirus pandemic.
Earlier this week, BOK Gov. Lee Ju-yeol said the BOK will “actively” deal with its purchase of government bonds.
“If the issuance of bonds expands, it will have an impact on financial markets. Because bond yields are expected to rise, (the BOK) will actively deal with (state bond purchases),” Lee told lawmakers.
Lee, however, reiterated that it is not desirable for the BOK to directly buy bonds issued by the Korean government.
If so, it will increase worries about fiscal soundness and undermine the trust of the central bank, Lee said.