South Korea's money supply grew 0.2 percent in October due to an increase in cash flow into money market fund (MMF) accounts that offer high returns amid the low rate trend, central bank data showed Wednesday.

The country's M2, called broad money, reached a seasonally- adjusted 1,827.3 trillion won (1.7 trillion U.S. dollars) in October, up 0.2 percent from a month earlier, according to the Bank of Korea (BOK). The on-month growth was up from a 0.1 percent rise tallied in the previous month. From a year before, the seasonally-unadjusted M2 expanded 4.6 percent.

The October growth was attributed to strong demand for the MMF from brokerages and insurers. Demand for the MMF, which offers higher return than other short-term financial products, has been strengthened recently amid the low rate trend.

South Korea's market interest rates continued to fall following the 2008 global financial crisis. Yield on the 10-year Korea Treasury Bond, benchmark of long-term market rates, dropped to 2. 97 percent in November this year from 6.03 percent in December 2008.

The low rate trend was expected to continue for a considerable period of time due to the global economic slump. Financial Services Commission Chairman Kim Seok-dong warned earlier this month that this trend will bring significant uncertainties to local insurers that are sensitive to changes in the interest rates and economic growth.

The M1, dubbed as narrow money, amounted to a seasonally- adjusted 449.6 trillion won in October, up 0.9 percent from the prior month, according to the BOK. From a year earlier, the seasonally-unadjusted figure advanced 5.5 percent.

The M1 covers currency in circulation and demand deposit equivalent to cash, while the M2 adds transferable savings deposit, time deposit and financial products that mature in less than two years to M1.

Liquidity of financial institutions, also called Lf, expanded 0. 3 percent in October from a month before. From the same month of last year, the Lf jumped 7.1 percent.

The on-month growth of liquidity aggregate, the broadest measure of money supply, logged 0.1 percent in October, with the on-year figure reaching 7.8 percent.

The Lf covers financial products with a maturity of more than two years and liquidity at insurers and brokerages along with M2, while the liquidity aggregate adds state and corporate bonds to the Lf.

The BOK began releasing the seasonally-adjusted figures on a monthly basis starting January in a bid to better reflect short- term changes in monetary conditions. In addition, the bank offered the seasonally-unadjusted data on a yearly basis to reflect the long-term monetary trend.