Thai government bonds rose, pushing the 10-year yield down by the most since July 2012, as better-than-expected U.S. retail data improved risk sentiment amid speculation the Bank of Thailand will cut borrowing costs.
The baht strengthened for a third day as the MSCI Asia Pacific Index of shares climbed 1.3 percent. The 10-year yield rose to a 20-month high earlier this week amid speculation the Federal Reserve will trim monetary stimulus. The BoT’s monetary policy committee judged the balance of risks tilting toward growth rather than inflation, according to minutes of its May 28-29 meeting released on June 12.
“Thai yields have gone up quite a lot and these are quite attractive levels for investors given the fact that the nation has room to cut rates to support growth if necessary,” said Tsutomu Soma, manager of Rakuten Securities Inc.’s fixed-income business unit in Tokyo. “Risk sentiment is improving slightly on the U.S. data and recovery in the stock markets.”
The yield on the 3.625 percent bonds due June 2023 fell 12 basis points, or 0.12 percentage point, to 3.81 percent as of 9:02 a.m. in Bangkok, according to data compiled by Bloomberg. The rate rose 18 basis points from a week ago and reached 4.01 percent on June 12, the highest level since September 2011.
A report yesterday showed U.S. retail sales rose 0.6 percent in May, compared with a 0.1 percent increase the previous month and the median forecast of a gain of 0.4 percent in a Bloomberg survey.
The baht strengthened 0.6 percent today and 0.2 percent this week to 30.58 per dollar, data compiled by Bloomberg show. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 29 basis points to 6.8 percent. It rose 14 basis points this week.
Inflation slowed for a fifth month in May to 2.27 percent, the least since November 2009, official data show.
Investec Asset Management Ltd. holds Thai sovereign bonds across the yield curve as the slowing inflation improves real yields, Mark Evans, an emerging markets fixed-income analyst in London, said in an e-mailed reply to questions last week.
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