JAKARTA: Indonesia’s central bank plans to hold two auctions per week for its new certificates, in sales intended to attract capital inflows as well as mop-up excess rupiah liquidity in the domestic financial market, an official said on Monday.
The auctions will be every Wednesday and Friday from mid-September and the frequency can be increased if needed, Edi Susianto, Bank Indonesia’s (BI) head of monetary management, told a press conference.
BI announced the plan to sell the so-called Bank Indonesia Rupiah Securities (SRBI) last week, which will use BI’s holding of government bonds as underlying assets.
This will replace BI’s “Operation Twist” in the bond market, where the central bank had been selling its short-term government bonds and vowing to buy long-term bonds whenever yields rise.
The SRBI will also replace BI’s reverse repurchase auctions as the central bank’s tool of reducing liquidity.
In the first stage, SRBI with 6-, 9- and 12-month tenures will be offered.
The central bank will later expand that to shorter tenures starting from one week, Edi said.
Asked about the return offered on the notes, Edi said: “The rates will be similar, no difference with current reverse repo of government bonds.”
He declined to provide guidance on how much liquidity BI will aim to absorb with the new instrument.
However, BI will continue to try to support economic growth with its liquidity policy, Edi said, calling it “not too tight, but will not be excessive”.
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