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Published on August 24, 2007

Senior director Pongpen Ruengvirayudh said yesterday the central bank would issue more bonds if eventual demand is significantly higher than the original batch. She declined to disclose the amount involved.

A large number of investors have expressed interest in buying the bonds - particularly those with four-year maturity - via the central bank and commercial bank branches.

Pongpen said some banks had declined to take reservations from investors because the bookings already received were higher than their quotas.

Pongpen insisted that every retail investor could fill out and send the forms to the banks from next Monday. Approval will be based on a first-come-first-served basis.

They are not required to pay for the bonds until September 3 for payment by cheque, and the following day for cash and direct deductions from bank accounts.

"We want the bonds to be distributed to retail investors as much as possible. They can send the forms to the banks although banks have said the quotas have run out," she said.

High returns - 4.25 per cent for a four-year bond and 5 per cent for a seven-year bond - are the main reason for the huge public interest. However, the central bank will not limit the maximum ceiling for each investor, said Pongpen.

Meanwhile, according to the head of the Public Debt Management Office (PDMO), the Finance Ministry aims to sell about Bt300 billion in regular government bonds in the fiscal year starting October 1. But that figure could go up if the legislature approves changes to the public debt bill.

The Finance Ministry is seeking to change the existing law restricting bond issuance to budgetary needs, in order to allow the PDMO to play a larger role in the development of the tiny domestic bond market.

"The draft amendment is queuing up for consideration by the National Legislative Assembly. Although I cannot prejudge whether the draft will be approved by the NLA, because it's up to them to decide, I'm quite positive about the outcome," Pongpanu Svetarundra told Dow Jones Newswires in a recent interview. He forecast the draft could be passed by the end of next month.

The Bt300 billion in bond issuance will be a shade higher than this year's expected Bt288.3 billion. The timetable for sales will be announced in the coming weeks.

"We are working on the planned issuance for the next fiscal year. It will be ready for announcement by the second week of September," Pongpanu said.

He said issuance in fiscal year 2008 would focus mainly on five- and 10-year bonds, which will be used as key benchmarks for the overall yield curve. It plans to issue between Bt60 billion and Bt80 billion of five-year bonds and about Bt60 billion of 10-year bonds.

In a bid to increase activity in the secondary market, the PDMO and market participants have agreed to reduce the frequency of auctions next year to once every two months for each of the two benchmark bonds - from once a month currently.

To respond to demand from long-term institutional investors, the ministry also plans to issue about Bt20 billion each of 15- and 20-year bonds.

Anoma Srisukkasem

The Nation,

Dow Jones Newswires