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Bt40 bn exits bond market so far this year

About Bt40 billion of capital has left the bond market so far this year, due mainly to matured issues, while the Bank of Thailand is expected to reduce the policy rate to cushion the economy from the prolonged political protests, according to the Thai Bond Market Association.

Ariya Tiranaprakij, deputy managing director of the ThaiBMA, said yesterday that from the start of the year to March 21, net bond sales amounted to Bt7 billion. Net sales of long-term bonds accounted for Bt34 billion and short-term bond purchases totalled Bt28 billion. About Bt33 billion worth of bonds matured.

Capital outflow was gradual and mainly came from matured bonds, while hot money had already moved out, she said, adding that most bond investment is for the long term.

From March 1-21, about Bt14 billion of capital moved out of the bond market.

Net bond sales totalled Bt2 billion with Bt13-billion long-term bond sales and Bt11-billion short-term bond purchases.

Matured bonds totalled Bt12 billion. Foreign holding of bonds was Bt685.28 billion, of which 15 per cent was in short-term bonds and 85 per cent in long-term bonds.

"After the Federal Reserve gave a signal for a faster-than-expected rate rise, Thailand's 10-year bond yield rose about 10 basis points. Foreign investors' selling was to lower risks to lock up profit before staying in short-term bonds.

"However, this week could see a return to the normal situation. The long-term bond yield moved in a narrow range of plus or minus 1 basis point during the Fed's news, which might be only short-term panic," she said.

The prolonged political situation might impact the Thai economic slowdown, which could lead to the central bank cutting the policy rate to prop up the economy, and that would be positive for the bond market.

This year, there is no large new supply in the bond market, while demand does not go down. This will likely prompt bond yields to drop.

"The Thai bond market continues its attractiveness despite the country's prolonged political factor. Moody's Investors Service still views Thailand as having strong economic fundamentals. Foreign investors do not consider only interest rates," she said.

Indonesia's return is 8 per cent, while Thailand's is 2 per cent.


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