BI to absorb Rp 13t through SBI auction
BI to absorb Rp 13t through SBI auction
JAKARTA (JP): Bank Indonesia is tightening the money supply by
offering Rp 13 trillion (US$1.01 billion) in one-month promissory
notes (SBIs) for auction today.
A state bank's head of treasury division predicted yesterday
that the central bank would most likely absorb less than its
target as much of the excess rupiah funds had not yet entered
into the banking system.
"Looking at the size it offers, the central bank seems to view
that the banking system is enjoying excess liquidity. But that is
not the case," the treasury head said.
"Therefore, I don't think Bank Indonesia can sell all its Rp
13 trillion in SBIs tomorrow (today)."
Bank Indonesia last week auctioned for the first time since
the crisis started Rp 13 trillion in SBIs. However, it managed to
raise only Rp 6.9 trillion, with a weighted average rate of 65.16
percent.
Local financial market analyst Iskandar Rusnawie welcomed the
central bank's move to absorb public funds through SBI auctions
and intervention.
He said rupiah supply in the market was so excessive that it
could push up inflation.
"I suspected that massive public withdrawals of funds from
Bank Central Asia a few months ago caused excess liquidity in the
market as the central bank had pumped a huge amount of money into
BCA to keep it afloat," he said.
In late May there was a run on BCA, which is controlled by
former president Soeharto's children and close ally Lim Sioe
Liong, following Soeharto's resignation from power. The run
forced the bank under the management of the Indonesian Bank
Restructuring Agency.
Money market dealers said the central bank's move to start
weekly auctions of one-month SBIs had capped interbank interest
rates.
Manaek Robert L. Toruan, head of the fixed income desk in Bank
Niaga's treasury division, said the central bank should conduct
more auctions of SBIs for more maturities to let the market
determine the rates.
He suggested that the central bank move its money market
intervention to the afternoon session only to give the market
more room to breath.
The central bank could intervene in the money market if the
regular auction missed its target.
"If BI enters the market in the morning, the interbank market
would be dry because banks with excess liquidity would chose to
place their funds in SBIs rather than in other banks in need of
funds," he said.
"But if BI enters the market in the afternoon, or not at all,
banks with excess liquidity will be forced to put their funds in
the interbank market." (rid)