Government to Strengthen the Treasury Bond Market
2nd Vice Minister An Do-geol presided over a treasury bond market inspection meeting, held on May 11. 2nd Vice Minister An discussed frameworks to strengthen the KTB market, as well as recent market trends and outlook with the heads of investment institutions and financial market experts.
The following is a summary of 2nd Vice Minister An’s keynote address.
Plans to continue proactive fiscal policy
Korea was able to achieve one of the fastest recovery thanks to strong GDP growth in Q1, rising in exports and domestic demand, as well as improved external factors. The government will do the following to make the fiscal policy play a more proactive role in the economy.
- Frontload its fiscal spending in the first half of this year to achieve much higher GDP growth than the initial estimate.
- Work on distributing the supplementary budget to those most affected in a speedy manner.
Importance of the Treasury bond market
The Korea Treasury Bond market has played an important role in buttressing the fiscal policy effort.
- Despite issuance surge, KTBs have been issued smoothly due to a strong demand from insurers, pension funds and foreign investors.
- Although financial market volatility grows amid U.S. yield spike at the beginning of the year, the market has recently calmed down as the MOEF and the Bank of Korea have implemented the measures to stabilize the market.
- There is a need to proactively respond to the potential risks at home and abroad, given Treasury bond supply-demand, global inflationary pressure, and concerns over sooner-than-anticipated monetary tightening.
Efforts to stabilize the Treasury bond market
Treasury bond market fluctuations may undermine the economic recovery and put a threat into the financial market. Given the risks, the MOEF will
- Flexibly adjust issuance size by month and by maturity, taking into account market supply and demand conditions.
- Carefully monitor the market and closely work together with related institutions including the Bank of Korea. When market volatility grows, the MOEF will quickly implement the market stabilization measures.
- Carry out the Measures to Enhance the Capacity of the Bond Market, which was released in October 2020, according to the plan.
- KTB Research Advisory Committee, which was established in February, will continue to communicate with market players and experts to promote investments in KTBs.
To this end, 2nd Vice Minister An highlighted that the MOEF will continue to communicate with the market participants and experts to take a leap forward, making the KTB market as one of the developed Treasury bond markets.
Please refer to the attached pdf
