HF MBS Designated as Eligible for KRX RP

- Expected to increase institutional demand for MBS

Korea Housing Finance Corporation (HF, CEO Lee Jung-Hwan) announced on January 7, 2019, that HF MBS have been designated by Korea Exchange (KRX) as securities eligible for purchase under a repurchase agreement (RP)*.  

    * A repurchase agreement (RP) is an agreement to sell a security combined with an agreement to repurchase the security at a specific interest rate at a given price (including the amount of interest) at a later date. 

RP trading in HF MBS has been available only in the over-the-counter repo market. The recent amendment to the agreement on participation and trading on KRX Repo, however, allows for the trading of MBS of one- to three-year maturity on KRX Repo as early as April. After KRX completes modifying its electronic trading system to reflect the change, MBS with a maturity of one to three years will be traded in the RP market from March. 

An HF official said, “With the amount of KRX-listed MBS surpassing KRW 110 trillion, MBS are now accepted for RP trading thanks to their increased status and credibility in the market. We expect the MBS demand of institutional investors, including securities firms with strong demand for money market funds, to expand once repo trading in MBS gains currency.”