À̹ÌÁö È®´ë The South Korean central bank handed out full 5.25 trillion won ($4.24 billion) in its first weekly repurchase agreement (repo) auction after it promised to run its version of ¡°unlimited¡± quantitative easing temporarily for three months.
The Bank of Korea said Thursday that it accepted bids for 5.25 trillion won for 91-day repo from a pool of borrowers extended beyond the traditional primary dealers to include securities companies at a rate of at 0.78 percent, 3 basis points over the policy rate of 0.75 percent.
The new liquidity boosted the money market sentiment. The three-year government bond yield fell 3.0 basis points from the previous session to 1.062 percent Thursday morning, and the 10-year note down 2.0 basis points to 1.525 percent.
The central bank on March 26 announced it would purchase unlimited amount of repos every Tuesday until June to ensure cash flows in the corporate and financial sector. The risk-free rate will be no higher than 0.85 percent and include wider range of financial institutions and collateral including notes issued by state-run enterprises. The auction was held on Thursday only for this week.
A repurchase agreement allows financial institutions to sell securities and repurchase them back at a slightly higher price. Repos are common tool of the central bank¡¯s open market operations aimed at providing short-term liquidity.
Liquidity in the bond market has been seriously squeezed as many brokerages issued commercial papers in a large scale to meet a surging margin calls.
Meanwhile, the $8.72 billion worth dollar lending by the central bank was also offered to the market on Thursday. The BOK conducted its first round of auction on Tuesday for up to $12 billion dollar lending using a currency swap line it signed with the U.S. Federal Reserve on March 19 to ease strains in the market.
By Pulse
[¨Ï Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]