Thai bond market bonds stronger, hits 17 trillion baht milestone

The Thai bond market reported a total outstanding value of 17 trillion baht (US$460 billion) in the first half of 2024, reflecting a 2.7% increase from the end of the previous year, as stated by the Thai Bond Market Association (ThaiBMA).

Within this total, long-term corporate bonds accounted for 494 billion baht (US$13.4 billion), with the majority being investment-grade bonds and only 5% classified as high-yield. Notably, the proportion of guaranteed bonds surged to 81% of total issuances in the first half, up from 48% last year. The average issuance period decreased to 2.2 years from 2.5 years in 2023.

The government bond yield curve remained relatively stable at the end of the second quarter compared to the end of 2023. This stability aligns with the policy interest rate holding steady at 2.50% since the Bank of Thailand‘s Monetary Policy Committee (MPC) meeting last September, according to ThaiBMA president Somjin Sornpaisarn.

The yields for 2-year and 5-year bonds increased slightly by 1 and 2 basis points (bps), while the 10-year bond yield decreased by 2 bps from the end of 2023, settling at 2.35%, 2.47%, and 2.68% respectively by the end of the second quarter of 2024.

The association anticipates a slight decline in the 5-year and 10-year bond yields this year to 2.47% and 2.73%, respectively, said Somjin.

“The main factor affecting bond yields in the future is the interest rate direction of leading economies and their economic expansion.”

A survey of bond traders revealed expectations that the local policy interest rate will remain at 2.50% this year. Additionally, 43% of respondents predict the MPC may cut rates at its final meeting in December.

In the first half, cumulative net sales of Thai debt instruments reached 66.5 billion baht (US$1.8 billion). This trend is partly due to the Federal Reserve’s decision to keep its policy rate at a high level for longer than anticipated.

The inclusion of Indian government bonds in the JP Morgan Emerging Market Bond Index (GBI-EM) is expected to reduce the proportion of Thai bonds in the index, reported Bangkok Post.

By the end of the second quarter, foreign investors held Thai debt instruments valued at 870 billion baht (US$23.6 billion), representing 5.1% of the total market’s outstanding value. The average remaining maturity of these instruments held by foreigners increased to nine years, up from 8.6 years at the end of 2023.