BOK to decide on details over support of bond fund next week

SEOUL, Nov. 20 (Yonhap) -- South Korea's central bank said Thursday it plans to decide on how much liquidity it would provide to an envisioned fund aimed at stabilizing the bond market earlier next week.

The regulatory Financial Services Commission (FSC) plans to create a
10-trillion-won fund (US$6.67 billion) into which existing institutional bond
investors, such as banks and the state pension fund, would pool money with the
aim of buying a wide range of bonds, including corporate debt.
"The FSC has asked the Bank of Korea (BOK) to consider joining the proposed bond
fund. On Monday, the BOK will discuss how much it would contribute to the fund in
a move to help it bear fruit," Lee Ju-yeol, a deputy governor at the BOK, told a
press conference.
Concerns are mounting that credit-squeezed local banks may be lukewarm towards
the fund and unload their government bond holdings to secure much-needed cash,
further rattling the debt market.
Market watchers are speculating that the BOK may support the fund by buying
treasury bonds held by banks or insurers through the central bank's repurchase
agreement operations.
Lee added the BOK is not considering buying commercial papers held by companies
or certificates of deposit as a way to provide liquidity to the fund, adding that
the government has not asked the central bank to do so.
sooyeon@yna.co.kr
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