BOT looks to US for safe havens
The Bank of Thailand (BOT) is to broaden its international reserve investments in Fannie Mae bonds soon, according to an assistant governor Nitaya Pibulratanagit.
The investment is aimed at increasing the bank's opportunity to seek higher returns with low-risk assets, including Fannie Mae financial instruments, which are guaranteed by the US government. Nitaya acknowledged that investment in Fannie Mae bonds was slightly riskier than in US bonds but was at an acceptable level. "We can invest in the bonds without amending the BOT Act," she said. Fannie Mae is an organisation offering mortgage loans to US households and then issuing mortgage-backed bonds for sale to investors. The assistant governor said the bank had to be cautious and wait for a proper time to invest in the bonds because the features were quite complex and the prices volatile. Nitaya said that when lending rates declined, the debtors redeemed their household debts before the end of maturity, which would affect the bond values, so that the bank would wait for the proper time to buy, when the bond prices decreased. "This security is difficult to calculate, so we have to carefully study how the price changes and when the proper time to buy arrives," she said. The BOT policy to expand its investment arose after it received low returns from investing in US government bonds, as other secured bonds available in the market had been neglected. Moreover, the central bank has boosted international reserves obtained from its earlier transactions to stabilise the baht when the US dollar depreciated. As of October 13, the BOT's reserves were US$61 billion (Bt2.27 trillion) with a net forward obligation of $4.2 billion. The BOT is also amending its draft act to widen its authority on reserve investments. It plans to put its reserves into bonds issued by international organisations of which it is not a member. The bank also wants to invest in highly rated private bonds and new financial instruments such as derivatives under certain guidelines to control risks. Other financial instruments which are unclearly defined in the current act will be clarified in order to encourage the bank to invest legally.
Anoma Srisukkasem The Nation
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