BOT TO ISSUE BT50 BN OF HIGH-INTEREST BONDS

       Risk-averse investors and those who missed the government's last savings bond sale now have another good chance, as the Bank of Thailand will issue at least Bt50 billion worth of four-and seven-year savings bonds offering high annual returns.
       "We will consider extending the bond issue to more than Bt50 billion with an unlimited target if there is heavy demand," BOT Assistant Governor Suchada Kirakul said yesterday.
       The four-year savings bonds will provide a return of 3.5 per cent and the seven-year bonds an average return of 4.2 per cent.
       The seven-year bonds will pay 3 per cent in the first and second years, 4 per cent in the third and fourth years and 6 per cent in the seventh year.
       The returns are higher than government bond yields, which were 2.88 per cent for four-year bonds and 3.5 per cent for seven-year bonds as of Wednesday.
       Subscriptions will open on September 3, 4 and 7 at the branches of 10 commercial banks nationwide.
       The bonds cover the 15-per-cent withholding tax so investors do not have to absorb the cost themselves. The bonds pay interest twice a year and can be unloaded in the secondary market six months after the subscription date.
       Suchada said the central bank wanted to give another investment choice to retail investors, who want good and secure returns with liquidity. Those who failed to get any of the government savings bonds issued earlier could also buy the BOT bonds.
       The bonds will also serve demand following the government's bonds of Bt54 billion that are due on September 2. It is one of the central bank's tools for managing the Bt1.7 trillion of excess liquidity in the system.
       The open condition of the bond issue will prevent the 10 agent banks from locking in special quotas for some of their own customers.
       Ariya Tiranaprakij, executive vice president of the Thai Bond Market Association, said the BOT bonds were good for cautious investors amid the current limited choices for savings.
       The yield curve is lower than when the government savings bonds were issued. The BOT bonds give returns slightly higher than the yield curve plus tax compensation, said Ariya.
       However, investors should not put all of their money into the BOT bonds because the government will probably issue more savings bonds and inflation-indexed bonds, she added.
       The market return might also be higher next year, as the yield curve is likely to increase. "Investors should diversify their holdings as they will have additional choices of investment over the next few years," she said.
       BOT Governor Tarisa Watanagase said the bond issue would possibly push deposit rates higher, depending on demand for the bonds.
       Liquidity is adequate because banks lend Bt500 billion-Bt700 billion to the central bank daily, she said.
       Suthipong Ittipong, senior executive vice president of Siam City Bank, said the BOT bonds would help drain out excess liquidity from the system, which would possibly cause banks to raise deposit rates at some point.