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South Korea’s financial regulator has decided to continue its bond market stabilisation measures into 2026, citing ongoing risks from domestic and global monetary policy shifts, higher government bond supply, and market volatility. The move covers large bond and short-term money market funds, along with substantial support for real estate project financing. Authorities indicated readiness to step in early if conditions worsen, as bond yields rise and currency movements remain volatile. The decision comes as the central bank signals it may be close to ending its interest rate cut cycle.
South Korea has chosen to extend key bond market stabilisation programmes, reflecting caution over financial market conditions and funding risks. The decision was taken against the backdrop of changing monetary policy at home and abroad, along with a rise in treasury bond issuance that could add pressure on yields. Advertisement
The Financial Services Commission said its bond and short-term money market stabilisation funds, amounting to 37.6 trillion won, would remain in place through 2026. In addition, real estate project financing support programmes worth 60.9 trillion won have also been extended for the same period. These measures were first introduced during earlier phases of market stress to ensure liquidity and prevent sharp disruptions in credit flows.
The regulator indicated that it remains alert to growing caution in domestic financial markets. It noted rising bond yields and higher foreign exchange volatility as key concerns and said it is prepared to deploy market-stabilising tools in advance if conditions deteriorate. Such pre-emptive action is aimed at limiting spillovers to broader financial segments, including real estate financing and corporate funding.
This stance follows recent signals from the Bank of Korea, which has kept interest rates unchanged for four consecutive policy meetings. The central bank has faced limited room to ease further due to pressure on the won, and its recent guidance suggested it may be nearing the end of its rate-cutting cycle. Higher global rates and currency sensitivity have continued to shape its cautious approach.
South Korea’s bond market has seen increased attention in recent years, particularly after periods of stress linked to project financing and tighter global liquidity. Authorities have repeatedly relied on backstop facilities to restore confidence and ensure smooth functioning of debt markets.
Source Reuters
5th Jun, 2025
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