The team of government officials and experts from the local securities industry is also expected to propose developing a proper benchmark yield curve, Bae Chang-mo said in an interview with Reuters Television.

"The Korean government has maintained a balanced budget policy in the past, restricting the issuance of government bonds. This (has been) attributed to the underdevelopment of the government bond market and the absence of a proper benchmark yield, like the TB (treasury bond) yield in the United States," Bae said.

The task force, scheduled to present their recommendations by the end of June, will recommend grouping similar government bonds together under standardised conditions and increasing the volume of each issue.

South Korea has removed restrictions on foreigninvestment in local bonds, but analysts said foreign investment has been lacklustre due to a complicated web of trading practices and a lack of proper benchmark yields."A successful implementation of these recommendations will lead to vitalising the government bond market, which then results in the formation of a proper yield curve," Bae said. Long-standing interest rate controls by the government and a lack of a marking-to-market accounting system have been blamed for the low liquidity on the secondary market, he said.

"Now interest rates are fully liberalised. So the task force will look into measures to implement a marking-to-market accounting system and a real-time disclosure system to improve transparency and liquidity in the secondary market," he said. South Korea has Asia's second-largest bond market after Japan and the government is trying hard to attract urgently needed foreign capital to expand its foreign exchange reserves and to finance corporate and financial restructuring.

The governmentplans to issue 50 trillion won ($35.8 billion) worth of bonds, including 40 trillion won worth this year, to raise funds to finance economic restructuring. Bae said stability was expected to be restored in local politics after nationwide polls on Thursday to elect provincial governors and council members.