Short-term bond yields' upward trend to continue
Yields for short-term bonds this month will maintain their upward trend, pressured by a surge in interest rates and reduced availability of short-term paper, MFC Asset Management said yesterday.
Special fixed-deposit products launched by local banks are among seven factors driving this trend. These instruments were seen as a key reason why the money supply had contracted in the market. Some banks, including Krung Thai Bank, TMB bank, Kasikornbank and Bangkok Bank (BBL), have offered special fixed-deposit products that provide interest rates close to bond yields. For instance, BBL last month offered a 10-month fixed-deposit product carrying interest of 5.125 per cent, while the yield of a one-year government bond at the end of last month was bidding around 4.97 per cent. Yield movement last month for of one-to-six-month bonds rose 0.37-0.55 per cent. One-to-three-year bonds increased 0.29-0.48 per cent, while five-to-10-year and over-10-year paper moved up in the range of 0.28-0.32 per cent and 0.27-0.35 per cent, respectively. A second factor contributing to the trend was an expected increase in the 14-day repurchase interest rate by the Bank of Thailand (BOT). A third factor was foreign and domestic investors unloading bonds, due to the political uncertainty. The political situation was cited as a fourth reason. A fifth factor was the adjustment in the issuance short-, medium- and long-term bonds. The BOT's one-year bond is scheduled for a weekly issue worth Bt12 billion, compared with Bt14 billion last month. The issuing of medium- and long-term government bonds, treasury bills and BOT bonds was scheduled to increase to around Bt3 billion per week in the second and third quarters, compared with an average of Bt2.6 billion per week during the first quarter. A sixth factor affecting the market was higher-than-expected inflation of 5.7 per cent, compared with the 5.1 per cent that analysts were expecting in February. And a seventh factor pushing bonds higher was the expectation that the US Federal Reserve would make another policy rate hike by mid-year. The researchers said trading this month would remain thin unless yields rebounded to challenge those offered by bank deposits. Total trading volume reached Bt441 billion last month. Piyarat SetthasiriphaiboonThe Nation
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