The Bank of Korea (BOK) decided to conduct an outright purchase of Treasury bonds worth 1.5 trillion won. The move is intended to secure Treasury bonds needed for the sale of repurchase agreement (RP) securities. RP sales are a tool the Bank of Korea (BOK) uses when it seeks to withdraw currency from the market.
The Bank of Korea (BOK) said in a notice posted on its website on the 8th that it will conduct an outright purchase of Treasury Bond "in consideration of the need to expand eligible securities for the sale of RP (repurchase agreement) and other factors." The purchase will be carried out by competitive bidding for 10 minutes starting at 11 a.m. on the 9th. The targets are 5-year, 10-year, and 20-year Treasury bonds.
An outright purchase of Treasury bonds refers to the Bank of Korea (BOK) buying Treasury bonds in the market. It is the first time in 3 years and 3 months that the Bank of Korea (BOK) has conducted an outright purchase of Treasury bonds since Sept. 2022, when rates surged and concerns rose over a squeeze in short- and long-term funding markets amid the Legoland incident, when it bought 3 trillion won.
A Bank of Korea (BOK) official said, "A long time has passed since the last outright purchase, and a significant portion of the Government Bonds we held has reached maturity," noting, "We proceeded with the outright purchase because we needed to replenish the bonds to be used for RP sales."
An RP sale refers to selling bonds on the condition that they will be bought back at a predetermined price after a certain period. For the Bank of Korea (BOK) to carry out an RP sale, it must hold Treasury bonds with remaining maturity.