South Korea's central bank on Monday announced a plan to inject up to 5 trillion won (3.33 billion U.S. dollars) into an envisioned bond fund in a bid to stabilize the local debt market.

"The central bank has decided to contribute a maximum of 5 trillion won (3.33 billion U.S. dollars) to the fund or match up to 50 percent of contributions by financial firms in a bid to help thaw the frozen debt market," said Lee Ju-yeol, deputy governor of the Bank of Korea (BOK).

The central bank basically plans to purchase treasury bonds held by banks, insurers and securities firms or buy back currency stabilization bonds before maturity. Those firms will invest the proceeds in the bond fund.

The BOK added that it also plans to buy bonds partly through repurchase agreement operations, its main method of releasing liquidity into the market.

The BOK purchased 2 trillion won (1.32 billion U.S. dollars) worth of bank and other special bonds through an auction of repurchase agreements last Friday.

(Xinhua News Agency November 24, 2008)