BOK buys 1 tln won in state bonds to calm market

SEOUL, Nov. 19 (Yonhap) -- South Korea's central bank on Wednesday bought 1 trillion won (US$688.2 million) worth of government bonds from banks and other financial institutions with no strings attached in a bid to stabilize the debt market.

The Bank of Korea (BOK) usually buys financial institutions' bond holdings or
sells its own bond holdings to them via repurchase agreements, which require the
institutions to repurchase or resell them at a later date.
"The BOK purchased 1 trillion won in government bonds through an auction. A total
of 2.44 trillion won was offered for bidding," the BOK said.
On Monday, the BOK decided to purchase treasury bonds in a move to calm the debt
market and increase its holdings of state bonds for repurchase agreement
operations.
The repurchase agreement is the central bank's main method of releasing liquidity
into the market in a credit crunch and of siphoning off excess liquidity.
The BOK also said it plans to supply a fresh 2 trillion won in liquidity by
buying bank and other special bonds through an auction of repurchase agreements
on Friday in an effort to ease a credit crunch.
"The BOK plans to buy 28-day repurchase agreements, 80 percent of which will be
composed of bank and special bonds," the BOK said in a statement. It is the
second time for the central bank to buy bank bonds since Nov. 11.
The BOK decided in late October to include bank bonds and some special debts as
collateral for its open market operations in a bid to stabilize the debt market.