LATEST BOT OFFERING A BIG SUCCESS

       Risk-averse investors yesterday warmly welcomed the latest central-bank savings-bond issue, snapping up Bt90 billion worth in only four hours.
       To encourage those interested in a secure investment and having a big savings pot, the Bank of Thailand (BOT) is allowing them to buy an unlimited amount of the bonds until Monday.
       Pongpen Ruengvirayudh, senior director of the Financial Markets and Reserve Management Department, expects demand for the bonds will exceed Bt100 billion. She did not confirm whether demand would reach Bt150 billion but did say the central bank would meet all requirements.
       Initially, the BOT said the bond issue would total only Bt50 billion but later said if demand grew, that could rise to Bt100 billion.
       However, yesterday the central bank said the issue amount could be unlimited.
       "Take-up is more rapid than expected. The bonds are available until Monday, and we'll sell as many as investors want to buy," the senior director said.
       Pongpen said the huge interest was due partly to a redemption of govekrnment bonds worth Bt54 billion on Wednesday.
       The unlimited bond issue is one of the key conditions that are attractive to investors.
       Earlier, savers were queuing very early in the morning for the savings bonds, because they were afraid that with a limited amount available, they would soon be sold out.
       "We changed to an unlimited amount, so that investors did not have to get up in the early morning to be the first in the queue," said Pongpen.
       Moreover, the bond yields are quite attractive compared with the low deposit interest rates offered by banks. The yields are slightly higher than those quoted in the secondary market and also cover with-holding tax of 15 per cent that bondholders are obliged to pay.
       "The interest rates are not unattractive," she said. The central bank is offering 3.5 per cent per annum for the four-year bonds and an average of 4.2 per cent for the seven-year bonds. Interest will be paid twice a year.
       Most investors have expressed interest in the long-term bonds.
       Of total sales, Bt90 billion, or 70 per cent, has been for the seven year bonds. Pongpen said most investors bought the seven-year bonds because they offered a step up yield.
       In the first and second years, they pay 3 per cent per annum. This increases to 4 per cent over the next two years and 5 per cent in the following two years.
       In the final, or the seventh year, they pay 6 per cent per annum.
       Pongpen said liquidity at some banks might be slightly affected by the bond issues/ However, their customers will be able to switch from deposit-based to bond-based saving.
       The BOT insists it will keep liquidity in the financial system stable.
       It plans to readjust transactions in other channels after the sale of the savings bonds ends.
       The savings-bond issues will not affect the general bond market, because amounts are small compared with government bond issues. Corporate and BOT bonds are normally sold to institutional investors, she said.

       "Take-up is mroe rapid than expected. The bonds are available until monday, and we'll sell as many as investors want to buy."