[뉴스토마토 박준형 기자] The domestic financial market is shaking because of the Legoland incident. The tension in the bond market is spreading throughout the financial market. Although the monetary authorities decided to implement a liquidity supply program worth more than 50 trillion won to prevent a money crunch, the Bank of Korea stepped in as market concerns persisted.
From next month, it plans to supply liquidity directly or indirectly to banks and securities firms. As concerns grew that the Legoland incident could lead to a crisis in the Korean economy, he suggested a plan that could have an immediate impact.
The financial investment industry has found that this measure would be effective in stabilizing the market at this time. We believe that the BOK’s measures to expand eligible collateral loans will be of immediate help. However, some point out that it is very likely to have only a short-term effect.
On the 27th, the Bank of Korea’s Monetary Policy Committee decided to widen the target of eligible collateral securities trading. Existing government bonds, MSBs, government-guaranteed bonds, mortgage-backed securities (MBS), and special bank bonds covered bank bonds and bonds issued by nine public institutions only. The application period is 3 months from the 1st of the following month until the end of January next year.
Eligible collateral guarantees are collateral that the BOK accepts when lending to commercial banks. These are mainly government bonds, financial stabilization securities, and government-guaranteed bonds. With this decision, banks will be able to provide bank bonds and public institution bonds issued by nine public institutions as eligible collateral securities to the BOK. There is no need to issue more bank bonds or secure cash to meet the liquidity coverage ratio (LCR).
Direct liquidity supply measures were also introduced here. The Bank of Korea will buy 6 trillion worth of temporarily won RPs from institutions subject to repurchase agreements (RP), such as securities and securities finance companies, until the end of January next year. Securities companies, etc., will be able to sell their bank bonds or KEPCO bonds to the BOK and receive funds.
The BOK estimated that domestic banks would be able to secure additional liquidity of 29 trillion won, as it cleared the roadblocks of banks and securities companies.
Securities analysts judged that the BOK’s measures would be of the most immediate help. The Bank of Korea believes that bank bonds and KEPCO bonds will be included in the applicable collateral securities, which will greatly help stabilize the market.
Hwa-jin Lee, a researcher at Hyundai Motor Securities, said, “It is a more effective and helpful policy than the one announced on the 23rd.” “Even after the BOK announced the 50 trillion won support plan on the 23rd, public and private bonds continued to be bid (unsold) and the credit spread continued to widen,” Lee said. ,” he said. He added, “If this measure is implemented and the operation of the fund, it is expected that the credit warning will be eased.”
After the announcement of the measures, the market shows an impact. Government bond yields are stabilizing, and bank bond issuance has turned negative. According to the Financial Investment Association, the yield on 3-year government bonds in the Seoul bond market on the 28th fell 0.142 percentage points from the previous chapter to 4.112%, and long-term bonds 10 years and 20 years and 2-. One-year and 5-year complex bonds fell. Corporate bonds also fell. The yield on AA-rated three-year corporate bonds was trading at 5.487%, down 0.133 percentage points from the previous day. Issuance of bank bonds by banks is also falling. From the 21st to the 28th, the net issuance of bank bonds turned negative (-) to 710 billion won.
Although expectations for an immediate stabilization of the market are high, it is expected that it will take some time for investment sentiment in the bond market to recover. As the root cause of interest rate rises is not going away, we believe that the impact will only be in the short term.
In fact, as the monetary tightening policies of major countries continue, credit spreads continue to widen. As credit spreads widen, credit bond prices fall, which increases the cost burden incurred by firms in raising funds. The credit spread, which is the difference between 3-year government bonds and 3-year corporate bonds (rated AA), widened to 1.375 percentage points on the 28th. This is the first time since August 2009 that the credit spread has exceeded 1.37 percentage points.
An Ye-ha, a researcher at Kiwoom Securities, said, “We believe this measure is an appropriate level of policy to mitigate market volatility in the short term. It is good to see,” he said.
Reporter Park Junhyung dodwo90@etomato.com
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