BOK to buy up to US$610.2 mln worth of bank bonds

SEOUL, Nov. 7 (Yonhap) -- South Korea's central bank said Friday it will buy up to 800 billion won (US$610.2 million) worth of bonds sold by commercial banks and other designated agencies through its repurchase agreement transactions early next week.

Last week, the Bank of Korea (BOK) decided to include bank bonds and some special
debts as collateral for its open market operations in a bid to stabilize the
market.
"The BOK plans to buy 63-day repurchase agreements worth 1 trillion won and the
total limit of securities with credit risks to be bought would reach 80 percent
out of that amount," the BOK said in a statement. The auction will be held on
Tuesday.
It is common practice for the central bank to adjust the amount of money
available in the financial system through repurchase agreement operations. The
sale of repurchase agreements, or repos, reduces money circulating in the system
while the purchase of repos adds funds.
South Korean banks have sold a huge volume of bonds in the past few years to
secure cash for loans to households and companies.
But local lenders are suffering from cash shortages as they have faced troubles
in rolling over debts. They also face difficulties in raising funds by selling
debts or certificates of deposit (CDs) amid the global financial turmoil, which
was sparked by the collapse of investment giant Lehman Brothers Holdings Inc.
The return on the 91-day CDs rose to a yearly high of 6.18 percent in late
October amid lackluster demand for such notes, but after the BOK's decision to
buy the bonds, the yield has been on the downward trend.
sooyeon@yna.co.kr
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