Government bond yields in the Republic of Korea dropped for all tenors between end-June and end-September, and fell further for most tenors between end-September and end-October. Between end-June and end-September, the decline in yields ranges from 7 bps in the 1-year tenor to 35 bps in the 5-year tenor. Between end-September and end-October, yields fell for tenors greater than 1 year with the 10-year tenor recording the largest monthly drop.

The local currency (LCY) bond market in the Republic of Korea expanded 8.6% y-o-y and 2.1% q-o-q to reach KRW1,389 trillion (US$1,179 billion) at end-September. Government bonds outstanding stood at KRW590.4 trillion, up 4.4% y-o-y and 1.2% q-o-q. The LCY corporate bond market grew 11.9% y-o-y and 2.9% q-o-q to reach KRW798.6 trillion at end-September. Private corporate bonds again boosted the market’s expansion, as the outstanding amount surged 29.9% y-o-y and 4.5% q-o-q to reach KRW331.9 trillion.

In October, the Bank of Korea announced the renewal of its bilateral swap arrangement with the People’s Bank of China for 3 years. The Financial Services Commission reported that the government approved on 27 September the proposed revision of the Enforcement Decree of the Financial Investment Services and Capital Markets Act, which will allow for the entry of locally based hedge funds into the Republic of Korea’s capital market. The government imposed a macroprudential levy on the non-deposit foreign currency liabilities of banks effective 1 August.