'Chaean Fund' Asset Manager Selecting Bonds for Purchase... First Purchase Expected on 6th

[Asia Economy Reporter Minji Lee] The government has reportedly entered the review stage to decide which bonds to purchase for the Bond Market Stabilization Fund (Cha-an Fund) established to stabilize the financial market. Accordingly, the actual bond purchases by the Cha-an Fund are expected to begin next week.

Financial Services Commission Chairman Eun Sung-soo is announcing measures to stabilize the financial market related to COVID-19 at the briefing room of the Government Seoul Office in Jongno-gu, Seoul on the 24th. Photo by Moon Ho-nam munonam@

According to the financial investment industry on the 3rd, IBK Asset Management, the lead manager of the Cha-an Fund, distributed the fund's capital to eight sub-fund managers on the 2nd and is currently selecting the bonds to purchase.

IBK Asset Management is reportedly working with the sub-managers to select bonds considering bond ratings, maturity schedules of existing bonds, and other factors. The first purchases are expected to start from the 6th. The funds will be allocated across various types such as corporate bonds, bank bonds, and commercial papers (CP), with amounts adjusted flexibly depending on market conditions.

The Cha-an Fund is a measure to stabilize the bond market shaken by the impact of the novel coronavirus disease (COVID-19), and is planned to be established with a total size of 20 trillion won. The first installment of 3 trillion won was paid in on the 1st.

On the 2nd, the yield on 3-year AA- rated unsecured corporate bonds closed at 2.093% per annum, down 0.6 basis points (1bp=0.01 percentage point) from the previous trading day. The spread with the 3-year government bond yield was 103.4bp, marking the highest level in 9 years and 4 months since December 8, 2010 (104.0bp).

The 91-day CP yield has risen for 12 consecutive trading days, closing at 2.23% per annum on the 2nd. The spread with the 91-day certificate of deposit (CD) yield (1.10% per annum) was 123bp, the highest in 11 years and 2 months since January 22, 2009 (127bp). A widening spread between CP and CD yields or between corporate bond and government bond yields indicates a relatively higher credit risk for companies.