Bloomberg News

Thai Bonds Gain After Funds Boost Holdings Before Rate Decision

March 31, 2013

Thailand’s government bonds advanced after global funds boosted holdings amid speculation the central bank will leave borrowing costs unchanged, maintaining the country’s yield advantage over developed nations. The baht fell.

Overseas investors pumped a net $4 billion into local debt and stocks in the first quarter, Bank of Thailand Assistant Governor Paiboon Kittisrikangwan said March 29. The monetary authority will keep its benchmark interest rate at 2.75 percent on April 3, according to 16 of 17 economists surveyed by Bloomberg, with one predicting a quarter of a percentage point reduction. Finance Minister Kittiratt Na-Ranong said last month that he wanted borrowing costs to be lower.

“Although they got pressure from the minister to cut rates, they may keep interest rates, maintaining the yield advantage,” said Disawat Tiaowvanich, a foreign-exchange trader at Bangkok Bank Pcl. “Fund inflows are supporting bonds.”

The yield on the 3.125 percent notes due December 2015 fell one basis point, or 0.01 percentage point, to 2.85 percent as of 9:06 a.m. in Bangkok, according to data compiled by Bloomberg. That’s close to the 2.848 percent level reached on March 26, the lowest in a month. The yield compares with 0.36 percent for similar-maturity debt in the U.S. and 0.07 percent in Japan.

The baht weakened 0.1 percent to 29.30 per dollar, data compiled by Bloomberg show. The currency has rallied 4.4 percent this year, the best performance in Asia, and touched the strongest level since 1997 on March 20.

“The baht has been really strong lately, but investors are probably locking in some profits after it reached the highest level since 1997,” Disawat said.

One-month implied volatility in the baht, a measure of expected moves in the exchange rate used to price options, dropped six basis points to 5.16 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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