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BOT issues bonds as strategic monetary policy tool

THE Bank of Thailand has continued to issue bonds as a monetary-policy instrument to ensure that money-market liquidity is at an appropriate level while fostering the development of a liquid and efficient debt-securities market.

According to its statement yesterday, the central bank, in consultation with bond-market participants, plans to enhance flexibility in liquidity management as it considers heightened uncertainties in the global financial markets, projected liquidity conditions and the government's bond-issuance plan.

It wants to ensure sufficient bond supply at every tenor to meet market demand.

Next year, the BOT will not issue one-month discounted bonds, to accommodate the government's plan to issue regularly one-month treasury bills. This is consistent with the central bank's plan to increase flexibility in liquidity management.

The range of issue size per auction of short-term and floating-rate bonds will be expanded. And to ensure sufficient supply to |meet market demand, the range of issue size per auction of two- and three-year bonds will be maintained.

To enhance liquidity of floating-rate bonds in the secondary market, the BOT will reopen the three-year floating-rate bond that was first issued this year to increase its outstanding amount per issue.

This year, the central bank adjusted bond issuance in line with changing liquidity conditions, the government's funding plan, and market demand. The adjustments included the cancellation of four-year fixed-coupon bonds and issuance of only one type of floating-rate bond - three-year bonds floating against three-month Bibor (Bangkok Interbank Offered Rate).

The central bank has also reduced issues of one-year discounted bonds from five to four per year to enhance liquidity.

It has modified its non-competitive bidding procedure and cancelled one-month discounted bonds in September to accommodate the government's regular issuance of one-month T-bills.


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