BOK to pump 1.5 tln won in liquidity through repos

SEOUL, Jan. 12 (Yonhap) -- South Korea's central bank said Monday it plans to
supply 1.5 trillion won (US$1.1 billion) in liquidity by buying longer-dated
repurchase agreement deals this week to help funds flow more smoothly in the
financial system.

The Bank of Korea (BOK) said it will hold an auction Tuesday to buy the 91-day
repurchase agreement deals.
A repurchase agreement is a deal whereby one party sells the other a security at
a specified price with a commitment to buy the security back at a later date. It
is the central bank's main method of releasing liquidity into the market in a
credit crunch and siphoning off excess liquidity.
"The BOK expects the considerable amount of the liquidity would be invested in
debt instruments like commercial paper," the central bank said in a statement.
Despite recent deep rate cuts by the BOK, the returns on corporate bonds and
commercial paper have stayed at a high level compared with those of government
bonds due to a lack of buyers.
sooyeon@yna.co.kr
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