Monthly Bond Summary

Centralbank bonds accounted for 88.65 per cent of trading value, while government bonds took only 5.53 per cent.

Looking at the yield curve in the Thai market, the yield for shortterm bonds with maturity of less than three years was down 27 basis points, while mediumterm bonds (310 years) shifted downwards 413 basis points, and longterm bonds (more than 10 years) moved downwards 210 basis points.

Notably, the benchmark bond yield, LB133A, dropped from 4.31 per cent to 4.21 per cent and LB183B fell from 4.39 per cent to 4.28 per cent at the beginning of last month.

The US Federal Open Market Committee decided to keep the federal funds rate unchanged at 2 per cent on September 17. It has now been at this rate since April. Economists had expected the Federal Reserve to cut the policy rate by 25 or 50 basis points, in order to alleviate and contain recent economic troubles.

As widely expected, the European Central Bank (ECB) followed up by keeping its policy rate at 4.25 per cent. Market expectations are that eurozone interest rates have already peaked and may be on their way down.

Locally, consumer confidence fell from 71.8 in July to 70.5 points in August, the lowest level so far this year. Overall sentiment is relatively uneasy, because of several problems, including the recent political uncertainty, negative signs for private consumption and investment, pessimism regarding local growth prospects and an export sector affected by global financial turbulence.

The Customs Department announced a trade deficit of US$783 million (Bt26.92 billion) in August, with export growth of 26.9 per cent and import growth of 14.9 per cent, following a deficit of $1.03 billion in July.

The Finance Ministry has released its financing plans for the fiscal year that began last Wednesday. It estimates government bond issues of Bt233 billion, up from Bt223 billion last year. The ministry recently reduced its growth projection for this year's gross domestic product from 5.6 per cent to 5.1 per cent, following the negative impacts from local political instability and declining tourism revenue.

The ministry also adjusted its assumption for the central bank's policy interest rate from 4.25 per cent to 3.75 per cent, implying that there would be no further movements in the policy rate this year.