Bonds have been marketed by the Kingdom of Thailand for more than a century, when the government in 1905 issued bearer bonds to creditors in London and Paris. The government issued more bonds through 1924 and then again in 1933, when the Ministry of Finance (MoF) circulated the first Thai domestic bond. The MoF’s issuance evolved during the 1940s to include the first Treasury bills. Regular issuance began with the inauguration of the National Economic and Social Development Plan in 1961.

In the 1990s, the Securities and Exchange Act of Thailand was established specifically to regulate the securities market. The Thai Bond Dealing Center followed in 1998 to improve bond information and price discovery. Since the Asian financial crisis of 1997-1998, Thailand’s bond market has developed significantly, with increased bond issuance and an actively traded local market.

The MOF has stepped up issuance of government bonds for its financing requirements and to build a reliable yield curve in support of market-risk pricing. Government bonds still dominate the market, making up about two-thirds of all bonds issued. With the introduction of regulations governing corporate bond issuance, a variety of issuers have entered the market, including multinationals, supranationals, and local companies. Both government and corporate bonds are available with tax waivers to foreign investors.

The Bank of Thailand (BOT) uses inflation targeting to drive monetary policy. On 17 January 2007, the Monetary Policy Committee (MPC) set the 1-day repurchase rate as the new key policy rate. Previously, the 14-day repurchase rate was used in the open market operation as a means to control inflation and support long-term growth. A combination of monetary instruments – the repurchase markets, BoT bond issuance, and foreign exchange swaps – are used to sterilize liquidity surpluses. Bond trading is conducted either over the counter (OTC) or via the Bond Electronic Exchange (BEX), established by the Stock Exchange of Thailand (SET) in November 2003. All OTC trades are reported to the Thai Bond Market Association (ThaiBMA) for posting.

Both the government and corporate issuers since the late 1990s have actively used bonds to raise capital. However, the issues are generally straight fixed-rate or floating-rate notes. The structured bond market is still in the early stage of development. Structured bonds, which are classified into structured notes and securitization bonds, were introduced in Thailand between 1993 and 1998, through transactions involving automobile and export receivables. In 2003, Dhanarak Asset Development Company Limited (DAD) issued the largest program of securitization bonds in Thailand for a Government Complex Project. DAD’s planned three-year program is still issuing securitization bonds and as of January 2007 had issued six tranches totaling THB18.5 billion. Including DAD’s securitization program, 21 Thai securitization bonds are registered with the ThaiBMA, ranging from THB77 billion to THB6 billion as of January 2007, representing about 1.3% of the market.