Bloomberg News

Thailand Three-Year Yield Near Lowest Since 2010 on Fund Inflows

November 13, 2012

Thailand’s three-year government bond yield was near a two-year low after international investors added holdings amid speculation the central bank will keep borrowing costs low this year. The baht held steady.

Global funds bought $133 million more sovereign notes than they sold in the first two days of this week, while cutting holdings of local stocks by a net $150 million, data from the Thai Bond Market Association and stock exchange show. Inflation slowed to 3.32 percent in October from 3.38 percent the previous month, according to a Nov. 1 official report. The Bank of Thailand, which cut its benchmark interest rate by a quarter percentage point to 2.75 percent on Oct. 17, next reviews monetary policy on Nov. 28 .

“Thai bonds are supported by fund inflows from overseas as inflation was lower than expected and rates are expected to stay low,” said Wee-Khoon Chong, a strategist at Societe Generale SA in Hong Kong. “Also, there’s a possible asset allocation shift out of Thai equities into bonds.”

The yield on the 3.625 percent notes due May 2015 was unchanged at 2.87 percent as of 8:40 a.m. in Bangkok, according to data compiled by Bloomberg. The rate reached 2.83 percent on Nov. 7, the lowest level in two years.

The Bank of Thailand cut its 2013 growth forecast to 4.6 percent from its earlier projection of 5 percent on Oct. 26. The monetary authority also reduced its inflation estimate for next year to 2.8 percent from 3.4 percent.

The baht was steady at 30.68 per dollar, according to data compiled by Bloomberg. One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 4.27 percent.

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

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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