By Toni Weeks
San Diego, Dec. 12 - The Bank of Thailand announced changes for 2013 to its planned bond issuance program in a bank press release on Wednesday.
In consultation with bond market participants, the bank decided to cancel several types of Bank of Thailand bonds, introduce a new product and change the issue sizes.
Canceled bonds
In 2013, the bank will no longer issue the four-year fixed-coupon bonds. This decision was in line with a potential surge in the supply of long-term bonds due to increased government funding needs, the bank said. In addition, as the overall net excess liquidity in the system is projected to barely change going forward, the decision lessens the need to expand the capacity to manage excess liquidity through longer-term bonds issuance.
The bank also said it will discontinue the issuance of two-year and three-year floating-rate bonds, which were linked to three-month and six-month Bibor, respectively.
New product
The bank will issue only one type of floating-rate bond, the three-year bond linked to three-month Bibor. This, and the discontinuation of the two-year and three-year bonds previously mentioned, will help enhance liquidity of the floating-rate bonds by increasing the amount outstanding per issue.
Issue sizes
According to the bank release, the bank will raise the issue size per auction of short-term bonds to be slightly lower than those of medium-term bonds, in line with liquidity conditions and planned issuance of government bonds. Overall, the amount of Bank of Thailand bonds sold in 2013 will largely match the maturing ones, the bank said.
The 2013 planned issuances are noted in the table below.
The bank also noted that the auction calendar will remain the same for 2013. Of the discount bonds, the cash management bills will be auctioned on Friday each week. The one-, three- and six-month discount bonds and the one-year discount bonds will be auctioned on Tuesdays each week, and the one-year bond will be auctioned on a Tuesday every month. The fixed-coupon bonds will be auctioned on a Thursday, with the two-year bonds auctioned in even months and the three-year bonds in odd months. Finally, the floating-rate bonds will be auctioned on a Friday every even month.
The Bank of Thailand considers the prevailing money and bond market conditions when determining the issue size and maturity distribution of bonds, the release noted. The bank also coordinates closely with Thailand's Public Debt Management Office to take into account the supply of government bonds.
According to the bank release, in 2012 the bank adjusted issuance to accommodate market demand and enhance liquidity in the secondary market. The adjustments primarily included a change in auction days for two-year and three-year fixed-rate bonds so that the bonds did not mature on Saturday or Sunday and a reduction in the number of new issues while increasing the amount outstanding per issue.
The bank continually issues bonds as one of the instruments used in implementing monetary policy to ensure that money market liquidity is at an appropriate level and to foster the development of a liquid and efficient debt securities market in Thailand, the release said.
Planned 2013 issuances
| Bond type | Issue size per auction | Outstanding per issue | Issues per year
|
| (billion baht) | (billion baht)
|
|
|
| Cash management bill discount bond | 30 to 70 | 30 to 70 | 50 to 52
|
| One-, three- and six-month discount bonds | 25 to 35 | 25 to 35 | 50 to 52
|
| One-year discount bonds | 30 to 50 | 90 to 150 | 4
|
| Two- and three-year fixed-coupon bonds | 20 to 40 | 60 to 120 | 2
|
| Three-year floating-rate bonds | 10 to 15 | 60 to 90 | 1
|
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