Bond market stabilization fund sets sail

SEOUL, Dec. 17 (Yonhap)-- Banks, insurers and brokerage houses launched a 10
trillion won (US$7.55 billion) bond fund on Wednesday in an effort to stabilize
the local debt market, a main asset-manager for the fund said.

The bond fund will be in place for three years and used to purchase debts from
banks and non-financial companies with money chipped in by a total of 91
institutional investors, KDB Asset Management Co. said in a statement. The fund
will start with a 5 trillion won pool, it added.
"The fund will be operated in a way that provides liquidity to companies facing
temporary cash shortages," the firm said.
The South Korean debt market has been frozen as local banks and companies
encounter difficulty in raising funds through bond sales, as buyers have been
scared off by the collapse of U.S. investment bank Lehman Brothers Holdings Inc.
Due to anticipated effects of the launch of the fund, bond prices -- which move
inversely to yields -- closed higher on Tuesday. The return on three-year
Treasuries shed 0.12 percentage point to 3.85 percent and the benchmark yield on
five-year government bonds also fell 0.14 percentage point to 4.21 percent.
sooyeon@yna.co.kr
(END)