Seoul: South Korea’s chief economic policymakers, including the central bank governor and finance minister, will meet Sunday to look into ways to calm the local credit market.
The meeting scheduled around midday is Korea’s highest-level policy discussion yet since yields surged to decade highs and default risks spread, prompting authorities to revive a 1.6 trillion won ($1.1 billion) bond stabilization fund earlier this month.
Bank of Korea Governor Rhee Chang-yong and Finance Minister Choo Kyung-ho will review the state of short-term fund markets including corporate bonds and commercial paper, the central bank said in a text message late Saturday. They will be joined by Financial Services Commission Chairman Kim Joo-hyun, Financial Supervisory Service Governor Lee Bokhyun and presidential aide Choi Sang-mok.
While meetings between BOK and other policymakers have been more common since Rhee took office in April, Sunday’s gathering underscores the urgency to beef up credibility after a rare default on commercial paper by the developer of Legoland Korea theme park. The province that homes the park has since pledged it would repay the 205 billion won of commercial paper repackaging loans for the project.
The default added to market unease spurred by rapid interest-rate hikes by the BOK trying to catch up with the Federal Reserve and the won’s depreciation, exacerbated by rising trade deficits.
Yields on Korean commercial paper have risen to a level last seen during the global financial crisis while sales of new corporate won bonds have plunged this month to the lowest on record for the period, according to Bloomberg-compiled data going back to 1999.
