Thai interest-rate swaps are set for the biggest weekly decline since September 2011 and government bonds rallied on speculation the central bank will lower borrowing costs to stem capital inflows.
Finance Minister Kittiratt Na-Ranong said yesterday he was “disappointed” policy makers didn’t cut the benchmark rate after an April 30 meeting, even as he urged them to do so after the baht appreciated to a 16-year high. Bank of Thailand Chairman Virabongsa Ramangkura, who is not a rate-setting committee member, said yesterday the currency’s advance has affected exports and the economy.
“Speculation of an interest-rate reduction continues, dragging swaps and bond yields down,” said Kozo Hasegawa, a foreign-exchange trader at Sumitomo Mitsui Banking Corp. in Bangkok. “The central bank also seems to acknowledge the baht’s appreciation has been too rapid.”
The one-year onshore swap rate, the fixed cost needed to receive a floating payment, slumped 28 basis points, or 0.28 percentage point, from a week ago to 2.32 percent as of 9:26 a.m. in Bangkok, according to data compiled by Bloomberg. That was the biggest drop since the five-day period ended Sept. 23, 2011, and the lowest level since February 2011.
The yield on the 3.625 percent bonds due May 2015 fell nine basis points this week to 2.75 percent, the lowest level since November 2010. The rate was unchanged today.
The baht headed for a second weekly loss, the longest stretch since November, amid concern the central bank will intervene and impose measures to slow inflows. The currency depreciated 1.1 percent from a week ago and 0.4 percent today to 29.56 per dollar, data compiled by Bloomberg show.
It has advanced 3.4 percent this year, the best performance in Asia, and touched 28.56 on April 22 and April 19, the strongest level since July 1997.
“Investors and traders are growing sensitive to comments and events with regard to the baht as speculation grew that the central bank will do something to halt gains,” Sumitomo’s Hasegawa said. “That makes it hard to buy the baht.” The currency may trade in a range of 29.20 to 29.60 next week, he added.
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