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S Korea to buy back 2 trln won of treasury bonds as yields surge

S Korea to buy back 2 trln won of treasury bonds as yields surge

FILE PHOTO: A South Korea won note is seen in this illustration photo May 31, 2017. REUTERS/Thomas White/Illustration

SEOUL :South Korea's finance ministry said on Tuesday it would buy back 2 trillion won (US$1.70 billion) of treasury bonds as part of emergency measures to stabilise local bond markets.

"We will closely monitor treasury bond markets and preemptively respond to the market situation by actively coordinating with the Bank of Korea if needed," Vice Finance Minister Ahn Do-geol said in a statement after a meeting with local bond dealers.

The yields on three-year Korea treasury bonds have surged a phenomenal 60 basis points since August as rising price pressures and a hawkish U.S. Federal Reserve spurred traders to price in multiple interest rate hikes in the coming months.

Yields on three-year treasury bonds hovered near their highest since 2018 at 2.09per cent on Tuesday, far ahead of the BOK's 0.75per cent benchmark interest rate.

The recent sell-off in local bond markets spurred the authorities into action last week with the ministry announcing a cut in shorter-dated government bonds issuances in the coming month.

The BOK also said it would slash the size of monetary stabilisation bond issuances but stopped short of announcing debt purchase plans.

(Reporting by Cynthia Kim; Editing by Jacqueline Wong)

Source: Reuters

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