As Interest Rates Soar Due to Expansionary Fiscal Policy... National Debt Research Advisory Panel Meeting

Ministry of Economy and Finance Holds 'Government Bond Research Advisory Group Kickoff Meeting'
Monthly Review Meetings... Core Tasks to be Pursued for 3 Years According to 3 Major Strategies

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Moon Chaeseok] The government held the first meeting of the National Bond Research Advisory Group to explore measures for managing the national bond market. This comes amid a situation where interest rates are rising sharply as the government and the ruling party prepare a supplementary budget to secure funds for the 4th emergency disaster relief payment, increasing the likelihood of financing through deficit bonds. When the issuance volume of national bonds increases, bond prices fall and bond yields naturally rise.

On the afternoon of the 26th, the Ministry of Economy and Finance announced that it held the 'National Bond Research Advisory Group Kickoff Meeting' at the Government Seoul Office, chaired by Kang Seungjun, Director of Fiscal Management. From this year, the advisory group was formed to manage the national bond market, and this was its first meeting. The advisory group consists of related institutions such as the Korea Development Institute (KDI), Capital Market Institute, Korea Financial Research Institute, market participants including the International Finance Center, national treasury bond primary dealers (PD), and national bond investment institutions such as banks, securities firms, insurance companies, and pension funds.

At the meeting, recent trends in the national treasury bond market, trends and outlook of the U.S. Treasury market, plans for operating the advisory group, and key research tasks for this year were discussed. In his opening remarks, Director Kang emphasized, "Last year, the supplementary budget was revised four times for the first time in 59 years, and this year, the largest-ever budget of 558 trillion won was passed," adding, "The role of the national bond market in ensuring smooth fiscal fund procurement and stable interest rate management has become more important than ever."

The advisory group will operate in two ways: 'regular monitoring' and 'focused research.' First, a monthly national bond market monitoring meeting will be held to review domestic and international market conditions and issues. For example, the outlook of the U.S. Federal Open Market Committee (FOMC) will be examined.

To strategically manage national bonds, three major strategies will be set along with goals for the next three years or so. Research tasks will be pursued sequentially according to these goals. This year, focused research will include analysis of the appropriate maturity structure of national treasury bonds, review of domestic demand conditions, and examination of interest rate term structure forecasting models.

An official from the Ministry of Economy and Finance said, "We expect the newly launched advisory group to serve not only as a professional support base for national bond policy but also as a platform for close communication with the market," adding, "We plan to operate the advisory group effectively by holding monthly monitoring meetings."

Meanwhile, national treasury bond yields have been rising sharply recently. According to the Korea Financial Investment Association, the closing yield of the 10-year national treasury bond was 1.884% the previous day, up 11.6 basis points (1bp=0.01 percentage point) from 1.768% at the end of last month.