Bloomberg News

Thai Interest-Rate Swaps Drop to 6-Month Low as Inflation Eases

October 04, 2011

Oct. 4 (Bloomberg) -- Thailand’s onshore interest-rate swaps dropped to a six-month low after a government report showed inflation eased last month to the least since March, reducing the likelihood of more rate increases this year.

Consumer prices gained 4.03 percent in September from a year earlier after having risen 4.29 percent the previous month, the Ministry of Commerce said yesterday. The Bank of Thailand may cut its estimate for economic growth this year and inflationary expectations aren’t likely to rise, Governor Prasarn Trairatvorakul said on Sept. 24.

“We are not in an environment to see a rate hike with growing uncertainties in Europe and the U.S.,” said Hideki Hayashi, a specially appointed fellow at the Japan Center for Economic Research in Tokyo. “Inflation is easing and there’s growing downside risks from the global economic slowdown.”

The one-year interest-rate swap, the fixed cost needed to receive a floating payment, dropped six basis points, or 0.06 percentage point, to 2.62 percent as of 3:15 p.m. in Bangkok, according to data compiled by Bloomberg. The rate was the lowest since April 1 on an intraday basis.

The central bank, which has raised its benchmark interest rate six times this year to 3.5 percent, meets next on Oct. 19 to review monetary policy. Governor Prasarn said last week that risks to global economic growth have increased, and Bank of Thailand policy makers will weigh the risks to growth and inflation when they next meet.

The central bank may keep its benchmark interest rate unchanged at its next meeting because inflation will continue to ease, Permanent Secretary for Commerce Yanyong Phuangrach said yesterday.

The baht added 0.2 percent to 31.15 per dollar. It touched 31.36 yesterday, the weakest level since Aug. 27, 2010.

Government bonds fell for a second day. The yield on the government’s 5.25 percent bonds due May 2014 added one basis point to 3.56 percent.

--Editor: Tony Jordan

To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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