BOT MULLS ANOTHER BOND ISSUE

       The Bank of Thailand (BOT) might issue another batch of savings bonds this year after the overwhelming response to the recent issue, with total subscription at Bt130.7 billion. The move is a part of its plan to restructure its liquidฌity management by increasing longterm instruments to absorb excess liquidity. This could reduce shortterm tools like bilateral repurchase market.
       BOT assistant governor Suchada Kirakul said yesterday that the central bank will issue a new tranche of savฌings bonds if the government does not issue its second lot of savings bonds within this year.
       Moreover, it has to consider if demand and supply in the market was appropriate.
       The Finance Ministry has planned to issue between Bt30 bilฌlion and Bt50 billion savings bonds in October after its first batch of Bt80 billion savings bonds sold out like hot cakes.
       "If we issue a lot of the twoyear and fouryear bonds, we could reduce the shortterm instruments. The government is not issuing the bonds currently but we have to closely coordinate with them," said the assistant governor.
       Liquidity surplus in the finanฌcial system now stands at Bt2.9 trillion, Bt1.7 trillion of which is available in the banking system. Of the total Bt2.9 trillion, a mere Bt500 billion is absorbed by bonds for periods of over a year.
       The BOT said about 60,000 investors bought the BOT savings bonds totalling Bt130.69 billion, 60 per cent of which were sevenyear maturity bonds.
       Suchada said after issuing the savings bonds, the central bank has reduced absorbing liquidฌity through other channels such as bilateral repurchase and deposit facility.
       In addition to bonds, the central bank injects or absorbs the liquidity with many tools, including the bilateral repurchase operation, outright purchase and foreign exchange swap.
       "We want to use different tools and don't want to rely largely on any particular instrument," she said.
       Currently, the outstanding BOT bonds, including saving bonds, amount to Bt1.5 trillion.
       Suchada said the central bank has reduced its liquidity absorpฌtion activities as the government has yet to spend after it had issued savings bonds worth Bt80 billion in early August.
       Moreover, the excessive liquidity slightly dropped due to corpoฌrate tax payment.
       The BOT makes liquidฌity projection to ensure it is on track. But the liquidity that the central bank provides daily to commercial banks would decline from around Bt800 billion to Bt900 billion to Bt660 billion.
       Suchada said a number of banks have actively reacted to a series of savings bond issues by the government and the central bank by raising longterm fixed deposit rates or introducing special deposit packages to attract customers.
       "The interestrate structure has not yet changed and the rates have long hit rock bottom," said the assistant governor.
       Meanwhile, the BOT has obtained a contribution of 802 million special drawing rights (SDR), or US$1.25 billion (Bt42.6 trillion), from the International Monetary Fund (IMF) in August.