SEOUL, Oct 20 (Reuters) – South Korea may ease some of the liquidity requirements for financial companies as there are signs of stress in the short-term money market, the head of the top financial regulatory agency said on Thursday.
Bond prices rose in early trade as investors welcomed the move, which came amid concerns about deepening stress on the short-term money market from rising interest rates and cooling in the real estate market.
Financial Services Commission (FSC) chief Kim Joo-hyun said his agency was watching the “increased volatility in the short-term money market” and would strengthen its response to stop any instability from spreading.
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“The chairman ordered strengthening in (the agency’s) responses so that the recent market situation is not spread into a broader market instability,” the FSC said in a statement.
The agency was considering easing some of the liquidity-related requirements on financial companies and expanding a bond market stabilisation fund to help ease the stress in the short-term money market.
“It’s a good step and came at a right time as the authorities are now making clear their intention to get involved before the stress deepens and spreads wider,” said Shinhan Securities analyst Ahn Jae-kyun.
The most liquid three-year treasury bond futures rose as much as 35 ticks on the day to 101.86, and 10-year treasury bond futures rose as much as 70 ticks.
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Reporting by Choonsik Yoo; Editing by Stephen Coates and Tom Hogue
Our Standards: The Thomson Reuters Trust Principles.
