The balance of repurchase agreements (RP) sold by domestic securities firms to general investors has surpassed 100 trillion won for the first time. The sustained bull run in the stock market appears to have expanded market liquidity.
According to statistics from the Korea Financial Investment Association on the 21st, as of 18th, securities firms' outstanding balance of customer RPs sold stood at 101.3262 trillion won, hitting an all-time high.
The outstanding balance of customer RPs sold refers to the total amount of RPs sold to nonfinancial customers such as individuals and general corporations.
An RP is a bond distributed on the condition that the securities firm buys it back after a certain period, and it is a typical short-term funding and investment tool for securities firms. It is not covered by the Depositor Protection Act, but it is backed by high-quality bonds such as Treasury bonds as collateral and typically offers interest somewhat higher than market rates, making it popular for its stability and returns. It is mainly purchased through comprehensive asset management accounts (CMA), and individual products such as won RPs and dollar RPs are also widely sold.
The outstanding balance of RPs sold steadily increased from 76.5891 trillion won on Jan. 2 last year, topped 98 trillion won on Jul. 31 this year, and surpassed 100 trillion won for the first time on Aug. 22. It then fell back to the 99 trillion won range before rising again to the 101 trillion won range three days ago.
The industry believes the stock market rally has spurred inflows and lifted demand for RPs. An increase in RP balances is also a sign that securities firms are actively managing short-term funds, and it is interpreted as an indicator that liquidity flows in the market are healthy.