The Monetary Authority will offer $35 billion worth of additional Exchange Fund Bills in the January 12, 19 and 26 tenders to meet the increased demand for the paper by banks given the abundance of liquidity in the banking system.

It made the announcement today, saying the additional supply of short-dated Exchange Fund paper will meet banks' strong demand for it for liquidity management.

The supply of three-month and six-month Exchange Fund Bills will be expanded. The three-month Exchange Fund Bills to be tendered on January 12, 19 and 26 will be increased by $18 billion. The six-month Exchange Fund Bills to be offered on January 12 and 26 will be expanded by $8 billion. In addition, a new issue of six-month Exchange Fund Bills, with a size of $9 billion, will be offered on January 19 and the issue will be rolled over upon maturity.

Details can be found in the revised issuance schedule for Exchange Fund Bills and Notes here.

The authority said the increase in the supply of Exchange Fund Bills is consistent with Currency Board principles, since the additional issuance simply represents a change in the composition of the Monetary Base, with a shift from the Aggregate Balance to Exchange Fund paper.

It said the Monetary Base remains fully backed by foreign-exchange reserves. Interbank liquidity is expected to remain abundant after additional Exchange Fund Bills are issued, which is not expected to have a significant impact on liquidity conditions and interest rates.

The Aggregate Balance is projected to decline by $9 billion on January 13, by about $14 billion on January 20, and $12 billion on January 27.