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The Bank of Japan. /VCG
Central banks in South Korea and Japan on Thursday announced bond buying plans to help douse the volatility in the local markets affected by fears surrounding the COVID-19.
The Bank of Korea (BOK) said it will buy 1.5 trillion won (1.2 billion U.S. dollars) worth of government bonds with the maturities of three, five and 10 years via open bid for 10 minutes starting 1:30 p.m. Friday local time.
The move is aimed at stabilizing the domestic bond market and use them in repurchase agreements transactions with commercial banks for liquidity adjustment, the BOK noted.
It would be the first time in over three years since November 2016 that the BOK directly bought state debts. It would be different from the quantitative easing (QE) as it planned to be taken as a one-off action, said the BOK.
The Bank of Japan (BOJ) also conducted emergency bond buyingof 1.3 trillion yen (12 billion U.S. dollars)in a bid to contain the rising long-term yields and stabilize the debt market.
The BOJ has been guiding the yield on 10-year government bonds at around zero percent as part of its ultra-loose monetary policy.
The yields surged as far as 0.070 percent Wednesday as expectations grew that the government's stimulus plan to mitigate impacts of the pandemic would contribute a sharp increase in new bond issuance.
The BOJ purchased 200 billion yen (1.83 billion U.S. dollars) worth of bonds with one to three years to maturity, 300 billion yen with three to five years to maturity and 700 billion yen with five to 10 years to maturity.
The BOJ earlier this week pumped 30.3 billion U.S. dollars in a three-month operation to ease shortage of dollar financing, the largest since 2008.
In addition, the European Central Bank (ECB) announced a 750-billion-euro (814 billion U.S. dollars) bond buying program on Wednesday to help protect the economy in Europe, the current epicenter of the COVID-19 pandemic.
Steep fluctuations in the stock markets have dragged down the local bond markets. Futures for 10-year South Korean government bonds on Friday dropped to the lowest since 2011. Italy's 10-year bond yield fell seven basis points last week.
(With input from Xinhua)
