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(Seoul=Yonhap Infomax) Hyun Woo Roh – South Korea’s Ministry of Economy and Finance (MOEF) has indicated it will not fully utilize its Treasury bond issuance limit for this year.
The move comes as volatility in the bond market has increased, with Treasury yields and broader market rates surging amid speculation over a possible shift in monetary policy direction. The government’s stance is seen as an effort to stabilize market sentiment.
According to bond market sources on the 26th, the MOEF conveyed this position during a meeting with primary dealers (PDs) held at the Korea Exchange’s Seoul office in Yeouido the previous day.
The remaining Treasury bond issuance limit for this year stands at approximately 9 trillion won ($6.8 billion).
Unlike previous meetings, where the authorities mainly outlined broad issuance plans and volumes, this session focused heavily on gathering market feedback, resulting in a longer meeting duration.
Market participants were divided over the total issuance volume and the potential use of buybacks.
Implementing buybacks would increase the overall issuance volume. Some participants argued that reducing the total issuance volume without conducting buybacks would be more beneficial for market sentiment.
However, others suggested that conducting buybacks could help manage volatility, even if it means a larger total issuance. They argued that having options to respond to volatility is preferable.
Market expectations are that if the total issuance is set at around 5 trillion won ($3.8 billion), the buyback volume would likely be in the 1 trillion to 2 trillion won ($760 million to $1.5 billion) range.
The exercise of non-competitive bid options for 5-year and 20-year Treasury bonds on the 27th, the same day as the Bank of Korea’s Monetary Policy Board meeting, is also seen as a factor that could influence next month’s issuance plans.
hwroh3@yna.co.kr
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