The Bank of Thailand is tapering 60 billion baht out of its July issuance of three-, six- and 12-month bonds, in a move likely aimed at curbing hot money and the baht's rapid gain.
The central bank is cutting its new weekly supply of three-month bonds by 5 billion baht each for five weeks from 40 billion baht issued weekly in June, and reducing the weekly supply of its six-month notes by 5 billion baht each from 45 billion baht in the previous month.
The Bank of Thailand's three- and six-month bonds to be issued this month constitute a total reduction of 50 billion baht, according to the central bank's bond auction schedule on its website.
The three- and six-month notes are to be auctioned on July 2, 9, 15, 23 and 30.
The central bank is also scaling back the size of the one-year note issuance scheduled for today by 10 billion baht from June's 45 billion baht.
The Bank of Thailand in 2017 tapered its new weekly supply of three- and six-month bonds as a tool to curb hot money after it found hefty foreign funds were flying into Thai short-dated notes for speculative purposes.
Assistant governor Titanun Mallikamas said last week that the central bank would soon implement measures to curb hot-money inflows after the baht recently rallied.
The Monetary Policy Committee has also voiced concern that the pace of appreciation is not consistent with economic fundamentals.
The central bank has found that speculative fund inflows are parking in short-end bonds.
The baht is among the best-performing currencies this year, up 6.6% against the US dollar. It strengthened by about 2.5% in the past three months, largely due to Thailand's clearer political situation after March's general election and easing signals from the Federal Reserve and the European Central Bank.
The local currency hit a fresh six-year high yesterday of 30.52 to the dollar.
Kasikorn Research Center said the Bank of Thailand's short-term bond supply could be one of the initial measures to tame the baht and the central bank should continue to monitor short-term capital movement.