The main and annex buildings of the Bank of Korea headquarters in Jung-gu, Seoul. [Herald DB]
The main and annex buildings of the Bank of Korea headquarters in Jung-gu, Seoul. [Herald DB]

The Bank of Korea said Monday it will extend the consolidated issuance period for one-year monetary stabilization bonds from two months to three months, a move aimed at strengthening the bonds' reserve adjustment function and improving trading liquidity.

The central bank announced a partial overhaul of its monetary stabilization bond issuance regime. Monetary stabilization bonds are securities the Bank of Korea issues to banks, other financial institutions and the general public to regulate the money supply.

Under the revised system, the consolidated issuance period for one-year bonds will be extended from two months to three months. The consolidated issuance date will also shift from the 9th of January, March, May, July, September and November to the 1st of March, June, September and December.

Early redemptions will be divided into two rounds: Early Redemption I on the first Tuesday of each month and Early Redemption II on the third Tuesday. Early Redemption I will follow the existing scheduled redemption calendar based on remaining maturity, covering three securities per round — one one-year bond and two bonds with two- or three-year maturities. The remaining periods eligible for early redemption of one-year bonds will be adjusted to four, five and six months, reflecting the extended consolidated issuance period.

Early Redemption II will cover approximately three securities per round, with specific targets announced each month through the monetary stabilization bond issuance plan. If any securities previously subject to regular scheduled early redemption are excluded from Early Redemption I as a result of the system change, they will be included in Early Redemption II to ensure redemption proceeds as planned.

Auction schedules will also be adjusted. The issuance week for two-year bonds will move from the first Wednesday to the second Wednesday of each month, while one-year bonds will shift in the opposite direction — from the second Wednesday to the first.

In addition, the Bank of Korea will designate benchmark securities by maturity for each period through its monthly issuance plan. The most recently issued security for each maturity among competitively auctioned bonds will serve as the benchmark.

The central bank plans to work with relevant institutions to boost trading in benchmark securities and strengthen their role as market reference points.

The revised framework takes effect Aug. 31. The Bank of Korea will reflect the changes in the "September 2026 Monetary Stabilization Bond Issuance Plan," set to be announced Aug. 27.

"We expect this measure to enhance the reserve adjustment function of monetary stabilization bonds and improve trading liquidity in the secondary market," the Bank of Korea said.


kimstar@heraldcorp.com