S. Korea to tackle potential volatility in bond market: official

SEOUL, May 11 (Yonhap) -- South Korea plans to respond to potential volatility in the state bond market as global inflation concerns and other risk factors could spark instability in the debt market, a senior government official said Tuesday.

Second Vice Finance Minister Ahn Do-geol said the Korean bond market stabilized after high volatility sparked by a spike in U.S. Treasury yields, but risk factors at home and abroad remain.

He cited bond supply situations, global inflation risks and cautions related to the early normalization of accommodative monetary policy as major risk factors for the bond market.

"The government will actively make efforts to stabilize the state bond market as a potential increase in volatility could hurt the financial markets and sap a recovery in the real economy," Ahn said at a meeting with bond market experts.

The return on longer-dated Korean government bonds rose in tandem with spikes in global bond rates and concerns about the country's planned massive debt sale. The yield in 10-year Treasury came to 2.218 percent as of end-April, up 16.1 percentage points from the previous month.

The government sold bonds worth 50.4 trillion won (US$45 billion) in the first quarter, some 27 percent of the planned yearly debt sale of 186.3 trillion won.

Foreign investors snapped up a net 11 trillion won worth of Korean government bonds in the first quarter, up from 8.6 trillion won three months earlier, according to the finance ministry.

sooyeon@yna.co.kr
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