South Korea's credit market is showing signs of stability less than two weeks after officials pledged to expand a $66 billion program if needed to limit the fallout from a builder's debt woes, analysts said, but added that it was still early days.

An announcement by Taeyoung Engineering & Construction , the country's 16th largest builder, on Dec. 28 to reschedule its debt has fuelled concerns about a credit crunch in money markets, as many real estate projects rely on the short-term debt market to finance construction projects.

On Tuesday, the yield on 91-day commercial paper was quoted at 4.24%, down from a 10-month high of 4.31% in early December.

It compares with a 14-year high of 5.54% in late 2022, when a missed bond payment by a local government-backed developer of theme park Legoland caused a credit crunch in financial markets.

"We cautiously do not see systematic risks from the event as we believe the government and authorities are likely to recycle policy tools from 4Q22, if necessary," Citi economists Jiuk Choi and Jin-wook Kim said in a report.

"Market impact has been limited as financial authorities are proactively announcing policy support and expanding when needed," said Choi Seong-jong, a credit market analyst at NH Investment Securities.

Authorities have been quick to limit any spillover from Taeyoung's debt troubles, and have urged the builder to fulfil creditors' demand to inject more liquidity into the company by selling its assets, including its stakes in local broadcaster SBS.

Finance minister Choi Sang-mok has vowed multiple times to "expand market stabilisation measures sufficiently as needed," although he has ruled out injecting taxpayers' money to bail out Taeyoung.

Shares of Taeyoung dropped 37% in December, hitting their lowest since early 2005, but have rebounded nearly 50% so far in January.

South Korea's property market, a key sector driving growth and affecting financial markets, has been sluggish since mid-2022 as demand dampened due to the central bank's aggressive rate hikes to tame inflation.

"Policymakers are approaching the issue with targeted measures, separating interest rate policy and liquidity support. They might consider lowering interest rates if market jitters worsen, but not pre-emptively," said Cho Yong-gu, a fixed-income analyst at Shinyoung Securities.

"There is still some worry about Taeyoung as the trouble is still at the early stage and may pick up pace after general elections in April," Cho said. ($1 = 1,314.8200 won) (Reporting by Jihoon Lee and Cynthia Kim; Editing by Muralikumar Anantharaman)