Bank of Korea supplies .525 trillion won on first day of ‘Korean quantitative easing’
Bank of Korea supplies .525 trillion won on first day of ‘Korean quantitative easing’
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  • 승인 2020.04.02 15:28
  • 최종수정 2020.04.02 15:27
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This article is translated by AI company Flitto and Infostock Daily using neural machine translation technology.
서울 중구 한국은행 본관. 사진= 한국은행
The main building of the Bank of Korea in Jung-gu, Seoul. Photo: The Bank of Korea

[Infostock Daily= reporter Song Jeong-hoon] The Bank of Korea has released 5.25 trillion won in the market through the purchase of unlimited repurchase conditional bonds (RP).

The Bank of Korea said on February 2, the RP purchase of 91 day Tenor was 5.25 trillion won, and the total bid was awarded.

The Bank of Korea introduced a "full-supply liquidity support system" that provides unlimited RP purchases for banks and securities firms for three months until the end of June last month.

RP is a bond that sells bonds on condition that financial institutions buy back after a certain period of time and repurchases interest according to the elapsed period.

If the Bank of Korea purchases RP through the open market, liquidity (currency) will be released to the market.

There was no such action that did not occur during the 1997 financial crisis or the 2008 financial crisis.

For this reason, the supply of funds was evaluated as 'Korean quantitative easing'.

The Bank of Korea regularly bids RP purchases every Tuesday, but it was conducted on the 2nd according to the first bidding schedule in April.

The RP maturity purchased by the Bank of Korea on the same day is 91 days, and the interest rate was determined to be 0.78% per annum, 0.03 percentage points higher than the benchmark interest rate (0.75% per annum).

Regarding the point that interest rates are higher than expected in the market, the BOK explained that it is not desirable to set the interest rate lower than the base rate, while the RP purchase rate ceiling was announced within 0.85%, which is the base rate + 10bp (1bp=0.01% point).

Reporter Song Jeong-hoon

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