Kim Yong-beom, vice finance minister, speaks at a macro economy finance meeting in Seoul on Thursday. [Photo provided by Ministry of Economy and Finance]

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A senior finance ministry official on Thursday intervened verbally to ease the supply concerns in the Korean bond market that significantly dampened trade despite two rate cuts by the Bank of Korea.

Kim Yong-beom, vice finance minister, on Thursday, said the concerns over oversupply in the market have been exaggerated.

“Some point to next year’s government debt pipeline for the rise in market yields… but net increase of 26 trillion won ($22 billion) from this year’s level is not excessive, given the size of the Korean bond market,” he said while chairing a finance-related meeting also attended by officials from the Bank of Korea, Financial Services Commission and trade ministry.

The vice finance minister argued there was solid demand for long-term government bonds from insurers, and foreigners, brokerages, and investment trust companies continue to invest in Korea sovereign debt as a safe asset.

Still, the government will act “flexibly” in issue period and maturity of the papers, depending on market conditions as not to burden the market with supplies.

The government also decided to enhance monitoring on financial markets at home and abroad such as market interest rate movement and make sure related institutions work closely with others when necessary to stabilize financial market.

The verbal intervention comes as the Korean government yields have going up despite rate cuts, restricting effect from monetary easing. The 10-year government bond yield rose 19 percent in October from 1.456 percent to 1,728 percent and as much as 52 percent from a low of 1.172 percent on Aug. 16, even after the Bank of Korea delivered its second rate cut last month.

The yield rise accelerated after the government proposed a record-sized budget of 513.5 trillion won for 2020, of which 130.6 trillion won would be raised through debt issues due to slow tax revenue. Of the debt offering, 60 trillion won worth would be new entries, nearly doubling this year’s 34 trillion won. The rest would be issued for refinancing existing debt.

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