Govt savings-bond rate offered up to 5%

The Bank of Thailand predicts headline inflation, the enemy of savers, will be minus 1 per cent to plus 1 per cent this year and 13 per cent next year.

However, many believe the economy has bottomed out, and even though it may take some time for a full recovery, market interest rates will increase. That would make government savings bonds less attractive.

However, Thai Bond Market Association president Nattapol Chavalitcheevin believes all of the features of this savingsbond lot are attractive overall.

First, They are riskfree. In addition, considering the normal five-year bond yield of 3.1 per cent and the normal savingsbond rate - usually with interest tax of 15 per cent added - of 3.8 per cent, the average 4 per cent of the Bt50billion savings bonds remains attractive.

Over the next five years, bankdeposit rates are unlikely to increase to more than 45 per cent, from 0.53 per cent now

Several years ago, bank rates would rise to about 8 per cent, but inflation then was as high as 10 per cent. Nattapol believes headline inflation is unlikely to increase to that level over the next five years.

The incremental rates of 3, 4 and 5 per cent for the fiveyear bonds are also suitable for retirees who need a steady return from very safe investment products.

Nattapol said the steprate coupon was set to encourage investors to keep the savings bonds until the end of maturity, when they would receive an average return of about 4 per cent.

Public Debt Management Office deputy directorgeneral Chakkrit Parapuntakul recently said many economists remained cautious about an economic recovery, believing both the local and the global recovery would be gradual.

Thus, interest rates are unlikely to sharply in the next few years.

Some are worried about inflationary pressure in the medium term, the next three to five years.

Chakkrit said the ministry did not figure the inflation outlook into its savingsbond coupon.

Prime Minister Abhisit Vejjajiva has raised the proposed minimum eligible age for individual subscription to the savings bonds from 55 years to 60. Thus, the selling schedule has was changed yesterday as follows:

The first batch of Bt15 billion will be sold from July 1314 to people aged 60 and above.

The second batch of Bt15 billion will be available from July 1517 for the elderly and other groups of retail investors.

The final Bt20 billion worth will be offered on July 17, 20 and 21 for retail investors.

For each subscriber, minimum investment is Bt10,000 and maximum investment is Bt1 million.

The Bt50 billion worth of bonds will be sold at seven commercial banks nationwide. Bangkok Bank, Kasikornbank, Krung Thai Bank, Siam Commercial Bank, Siam City Bank, TMB Bank and Bank of Ayudhya today will all sign an agreement with the Finance Ministry to distribute them.

Meanwhile, Finance Minister Korn Chatikavanij said the government planned to borrow Bt150 billion by September to finance investment and the budget deficit.

The Finance Ministry will manage Bt1.4 trillion worth of debt refinancing and new borrowing this year and roughly same amount next year.