Thais face higher borrowing costs

 Thai BMA President Nattapol Chavalitcheevin said higher rates are inevitable and private companies would be encouraged to turn to domestic funding sources. He noted that the bond market would then see a higher number of corporate bonds.

 Thai companies are now subject to the 1.7 percentage points premium above London Interbank Offered Rate (Libor), following the Lehman Brothers' debacle. The premium was 1.4 percentage points following the state of emergency.

 Nattapol noted that the premium is raised as US financial institutions are returning cash back home, to support capital increases.

 "As massive fund mobilisation is taking place in the US, global liquidity would turn dry. Coupled with lower confidence in financial papers, this would cause problems to borrowing and lending rates would hike as well as spreads," he said. "Under this circumstance, it looks nearly impossible for Thai companies to proceed with planned bond issuances."

 Earlier, PTT Group delayed a bond issued indefinitely.