S. Korea, BOK to coordinate for buyback, KTB purchase if needed

The Bank of Korea (BOK) announced plans to conduct outright purchases of ₩3 trillion in government bonds to address heightened volatility in the treasury bond market, driven by surging oil prices and inflation concerns according to financial reports. Yields on three-year, five-year, and 10-year treasury bonds rose sharply, with the three-year yield hitting 3.420%—its highest level since June 2024—amid foreign investor selling and stop-loss orders. The central bank aims to stabilize supply-demand dynamics by directly purchasing bonds across multiple maturities through a 10-minute auction starting at 11 a.m. on March 10 as announced. This intervention mirrors a similar ₩3 trillion buyback in September 2022 during the Legoland crisis as reported.

Analysts note that while rising oil prices pose inflation risks, the BOK is prioritizing market stability over immediate rate hikes. Citigroup highlighted that policymakers may delay tightening unless inflation exceeds targets by 1 percentage point. Meanwhile, Societe Generale and Barclays suggested that foreign inflows linked to Korea's inclusion in an FTSE Russell index and anticipated economic data could cap bond yields. The BOK emphasized it will closely monitor oil price trends and inflation developments, with Governor Rhee Chang-yong convening an emergency meeting to coordinate responses with the finance ministry.

The move underscores the central bank's balancing act between managing inflationary pressures and supporting economic growth amid global uncertainties. Market participants await key data, including South Korea's fourth-quarter GDP, to gauge future policy direction.