The auction results show that the government had planned to raise 43bn/- in the 24-month treasury bonds but ended up with over 75bn/-. The continued oversubscriptions of government securities in recent days portray healthy liquidity in the market with more cash chasing for few investment opportunities. Investors are inclined to maximise in every deal that they invest their money given the present state of high inflation striking the country.
Tight liquidity is one of the BoT monetary policy instrument used to tame inflation. For example, the number of successful bids was only 28 compared to 68 that were received, a sign that some bidders quoted below the price offered.
Likewise, despite the average yield to maturity of 13.83 per cent remaining unchanged compared to the previous two-year bond auction conducted in August this year, it did not prevent investors to inject massive funds into the government securities.
Yield rate has been one of the major determinants that draws attention of investors’ appetite in most government papers. The Standard Chartered Bank in its daily market commentary had forecast outstanding performances of the two-year Treasury bond despite the high inflation rate of 13.5 per cent, the rate of change of prices of various commodities for the month of September this year.
“The BoT will be auctioning the two-year bonds worth 43bn/- but the curve is expected to decline by about 25 basis points higher than inflation rate of 13.5 per cent, down from 14.9 per cent recorded in August,” stated the Bank report.
Similarly, the bank report shows that maturities of 30bn/- was expected to hit the system. Commercial banks have remained to be the giant investors in government securities contributing above 60 per cent of the total market share. Pension Funds, insurance and few micro-finance institutions firms are among the key investment players in the instruments.