Due to Interest Rate Hike... Bank of Korea to Reduce November Treasury Discount Bill Issuance

Mid-Term Redemption Amount Expanded to 5 Trillion Won
Market Stabilization Measures

[Asia Economy Reporter Jang Sehee] The Bank of Korea has decided to reduce the issuance volume of Monetary Stabilization Bonds to curb soaring market interest rates.

On the 28th, the Bank of Korea announced that it would reduce the issuance amount of Monetary Stabilization Bonds in November by 2.4 trillion won compared to the previous month and increase the early redemption amount by 1 trillion won. Accordingly, the competitive bidding issuance volume of Monetary Stabilization Bonds in November will be 6.6 trillion won.

Monetary Stabilization Bonds are bonds issued by the Bank of Korea to control the money supply in the market. Reducing the issuance volume of these bonds decreases the supply of bonds, causing their prices to rise (and bond yields to fall).

Thus, the competitive bidding issuance volume of Monetary Stabilization Bonds in November was reduced by 2.4 trillion won compared to the previous month's issuance plan, to 6.6 trillion won. By maturity, the 91-day bonds were reduced from 1 trillion won per issuance to 700-800 billion won, the 1-year bonds from 1.2 trillion won to 700 billion won, the 2-year bonds from 2.5 trillion won to 1.8 trillion won, and the 3-year bonds from 1.3 trillion won to 1 trillion won.

Additionally, the early redemption amount was increased by 1 trillion won from the usual 4 trillion won to 5 trillion won.

A Bank of Korea official stated, "By expanding the investment capacity in the bond market by a total of 3.4 trillion won, we expect to contribute to improving investor sentiment and mitigating interest rate volatility."

Meanwhile, on the 27th, the 3-year government bond yield, a representative domestic market interest rate, closed at 2.044%, up 0.097 percentage points from the previous day, setting a new yearly high. This is interpreted as being influenced by the global interest rate hike trend and expectations of a base rate increase by the Bank of Korea.