The Finance Ministry will issue Bt20 billion worth of 20-year government bonds in the fourth quarter of the year, its first batch of such long-term debentures.

The money raised from the bond sale will be used to refinance debts of the Financial Institutions Development Fund (FIDF), said a ministry source, adding that there were currently no outstanding 20-year maturity bonds issued by the ministry.

Meanwhile, Dhanarak Asset Development Co, the property arm of the Treasury Department, announced yesterday it would issue between July and November securitised bonds worth Bt8.7 billion with 15-year and 20-year maturities. Proceeds will be used to finance the building of a new government complex on Chaeng Wattana Road.

According to Kanit Sangsubhan, financial advisor to the project and director of the Fiscal Policy Research Institute, the company will wait for the right moment to issue the bonds. The current market consensus is that interest rates will be flat in the second half of this year after a fast rising pace in the past few months.

Kanit said he expected Dhanarak would offer around one percentage point lower than its previous securitised bonds, issued last year. That's when company issued bonds that matured in seven years, 15 years and 20 years worth a combined Bt10.3 billion and an average coupon rate of 7.59 per cent. He blamed the previous higher rate on the high supply of bonds because many institutions had raised funds via long-term bonds. Kanit said Dhanarak expected fewer institutions to raise funds via the bond market this year leading to a lower rate.

"Now the short-term rate is high but the long-term rate is lower, so we may not offer institutional investors as high a rate as we did last year," he said.

If there are no unforeseen changes, the 15-year bonds are expected to amount to Bt2.2 billion, while the 20-year maturity bond are expected to raise Bt6.5 billion.

Dhanarak also plans to issue 20-year maturity securitised bonds next year worth Bt5 billion.

If it goes according to plan, the company will issue bonds worth a combined Bt24 billion. The securitised bonds are backed by future rental incomes paid by government agencies that rent office space in the government complex.

Dhanarak also yesterday signed contracts with Italian-Thai Development Plc and Sino-Thai Engineering and Construction Plc worth a combined Bt13.2 billion for the construction of a new government complex on Chaeng Wattana Road.

Wichit Chaitrong

The Nation