Bank of Korea to issue 7 trillion won in stabilization bonds in October

The Bank of Korea said Monday it plans to issue 7 trillion won ($5.18 billion) of monetary stabilization bonds in October, unchanged from September's total.

Within that amount, 6.3 trillion won ($4.66 billion) will be sold through competitive bidding, down 100 billion won ($74 million) from a month earlier. The bank left 0.5 trillion to 0.7 trillion won ($370 million to $518 million) for direct take-up, widening the upper end of that range from September's 0.5 trillion to 0.6 trillion won ($370 million to $444 million).

The bank also plans to buy back 2 trillion won ($1.48 billion) of the securities before maturity during October, down 300 billion won ($222 million) from September. The early repurchases will be split into two operations: 1.6 trillion won ($1.18 billion) on Oct. 8 and 400 billion won ($296 million) on Oct. 22.

Stabilization bonds are the central bank's main tool for absorbing liquidity from the financial system, draining reserves from banks when it sells the securities and releasing them when it redeems them early.

The October plan is the second drawn up under a revised issuance framework that took effect on Aug. 31. The changes, announced on Aug. 10, introduced the concept of benchmark issues by maturity, extended the combined issuance period for one-year bonds from two months to three, and expanded early repurchases to two rounds a month, labeled Early Repurchase I and II.

Early Repurchase I, with bidding on Oct. 6, will cover three issues maturing in 2027 and 2028. Early Repurchase II, with bidding on Oct. 20, will cover three issues maturing in 2027. Both auctions run from 10:20 to 10:30 a.m.

The Bank of Korea said it expects the longer combined issuance period, the more frequent early repurchases, the revised issuance schedule and the benchmark issues to improve the bonds' effectiveness in managing bank reserves and to increase trading liquidity in the secondary market.