According to T-bills invitation tender, the central bank is expected to raise 172bn/- from the markets, of which 72bn/- will be for the government financing purposes, and 100bn/- will be moped up for liquidity management.
The interest rates for the bills are subjected to 10 percent withholding tax.
Analysts are expecting the Treasury bills to be traded at discount.
In its statement after its 227th ordinary meeting on 31st August, the BoT’s Monetary Policy Committee accepted the central bank to continue implementing less accommodative monetary policy to align liquidity with the foreign exchange demand.
This is the continuation since 2022/23, when the BoT shifted from pursuing an accommodative monetary policy to a less accommodative monetary policy in response to the spillover effects of the global economic shocks caused by the war in Ukraine, the residual effects of COVID-19 pandemic, and domestic economic conditions.
During the year, the implementation of monetary policy succeeded in maintaining adequate liquidity in banks.
The conduct of monetary policy, fiscal policy measures and improved business environment contributed to the high growth of private sector credit, without causing undue inflationary pressures to the economy.
The current less accommodative monetary policy measures are also expected to facilitate attainment of the targets under the Extended Credit Facility Program for the quarter ending September 2023, says BoT.
Last month, the BoT conducted two Treasury bills auctions of which it intended to mop up combined 200bn/- excessive liquidity.
During the auction held on August 9, the T-bills were under subscribed for 35, 91 and 182 days maturities, with exception of one 364 days maturity, which was oversubscribed.
During another auction held on August 23, of which the central bank wanted to raise 172bn/- the results show 35, 91, and 364 days maturities were undersubscribed, with exception of six months, which was oversubscribed.
In its Monetary Policy Statement for June, BoT indicated that the implementation of monetary policy in the first half of the 2023/2024 financial year will be based on the current monetary targeting framework, while in the second half, an interest rate-based monetary policy framework will be used.
“The shift to the new framework is meant to address the weakening of the link between money supply and the ultimate policy variables (inflation and output), due to the proliferation of financial innovations, and the weakening of monetary policy transmission under the monetary targeting framework,” the MPS says.
The monetary targets for the first half of 2023/24 are growth of reserve money of 10.1 percent, growth of extended broad money of 10.1 percent, and private sector credit growth of 16.4 percent.
The targets for the second half of 2023/24 will be announced in the Monetary Policy Statement, Mid-Year Review, to be released in February 2024.
According to BoT’s Monthly Economic Review for August, money supply growth sustained an upward movement, growing at 20.9 percent in the year ending July 2023, higher than 7.9 percent in the corresponding period in 2022.
This strong growth was largely attributed to a robust expansion of credit to the private sector.
Credit to the private sector remained strong, largely backed by higher demand for loans that is associated with improving business and investment environment.
On annual basis, credit to the private sector grew at 20.8 percent in July 2023, almost the same as the rate registered in the preceding month and in the corresponding period in 2022.
Agricultural activities continued to record the highest growth of credit at 46.4 percent, followed by building and construction at 26.1 percent.
Bond market
Last week the Central bank issued a 2-year Treasury bond which offers a coupon rate of 7.60 percent.
The bank received tenders worth 21.85billion reflecting under subscription of 84.21 percent. The bank accepted bids worth 21.85bn/-.
Activity in the secondary market experienced a decrease of 2 percent where volume of transactions decreased to 68.87bn/- from 70.28bn/- of the previous week.
The Demand notes were primarily the 15years, 20years, and 25years Treasury bonds.
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