Thailand’s bond market has developed significantly since the 1997/98 Asian financial crisis, with increased bond issuance and an actively-traded local market.

The Ministry of Finance (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 80% 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 open market operations 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—is used to sterilize liquidity surpluses. Bond trading is conducted either over-the-counter (OTC) or via the Bond Electronic Exchange (BEX), which was 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.

Since the late 1990s, both government and corporate issuers have 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 stages 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 project. DAD’s planned THB24 billion three-year securitization program was issued in seven tranches. Including DAD’s securitization program, 21 securitization bonds were issued and traded in the secondary market with the issue size ranging from THB6 billion to THB77 billion.