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Published on December 21, 2007

The central bank issued bonds amounting to Bt4.03 trillion in the period, Thai Bond Market Association president Nattapol Chavalitcheevin said yesterday. Meanwhile, commercial papers issued by the private sector in the first 11 months of the year doubled from the same period last year to about Bt1.52 trillion.

Corporate bonds floated in the primary market rose at an annual rate of 29 per cent to Bt183 billion, he said.

The Finance Ministry in November approved the issuance of an additional Bt500 billion of BOT bonds to absorb liquidity from its baht intervention. The central bank has already issued Bt1.3 trillion worth of bonds.

"The central bank had a quota to issue Bt1.5 trillion of bonds and has asked [to issue] another Bt500 billion, and this has pushed up the government bond yield in the second half this year as investors are concerned that it might create oversupply," he said.

"However, the government bond yield will increase a little bit next year as news of the BOT's new bonds is partly factored in this year. I believe the BOT will consider issuing longer-maturity bonds."

Treasury bonds, however, bucked the trend. Issuance in the first 11 months declined 36 per cent year on year to Bt572 billion.

Nattapol said uncertainty about the domestic interest rate outlook was blamed for investors shifting to short-term bonds. The BOT's easing of its 30-per-cent reserve requirement by allowing foreign investors to fully hedge against their investment instead, did not help boost their investment in the Thai bond market, he added.

Trading of bonds in the secondary market as of December 18 has risen 148 per cent to Bt17.23 billion.

He forecast that bond issuance next year would increase across the board. The central bank will still be the largest bond issuer, while corporations will issue bonds and commercial papers to the tune of Bt200 billion and Bt1.6 billion respectively, he predicted.

"Bonds to be issued next year will carry less than five-year maturity to meet demand as investors have low confidence in corporate bonds, so long-term bond issuance might receive a warm welcome from investors," he said.

Siriporn Chanjindamanee, The Nation