Market Summary

Yield Movements

Between 31 August and 15 October, Thailand’s local currency (LCY) government bond yields rose across all tenors, shifting the yield curve upward. Yields jumped an average of 34 basis points (bps), with the 15-year tenor gaining the most at 52 bps. The yield on 2-year bonds rose 18 bps, while the yield on 10-year bonds jumped 40 bps. As a result, the spread between the 2-year and 10-year yields widened to 134 bps during the review period. The rise in Thai LCY bond yields tracked the movements of other sovereign bond yields in the region, which rose in tandem with United States Treasury yields. The uptick in yields was primarily due to inflation fears and uncertainties over the Federal Reserve’s plan to taper its quantitative easing measures by November. Expectations of a rise in the supply of government bonds in the near term, brought about by a higher public debt ceiling, also contributed to the rise in Thai sovereign yields. 

Size and Composition

Thailand’s outstanding LCY bond stock amounted to THB14,479.7 billion (USD429.6 billion) at the end of September. Overall growth eased to 1.9% quarter-on-quarter in the third quarter of 2021 from 2.6% quarter-on-quarter in the previous quarter, driven by weaker growth in the corporate bond segment. Annual growth also slowed to 3.3% year-on-year in the third quarter of 2021 from 5.6% year-on-year in the second quarter. Government bonds continued to dominate the Thai LCY bond market with a share of 72.9% of total bonds outstanding at the end of September.

Policy, Institutional, and Regulatory Developments

On 1 October, Thailand’s Public Debt Management Office announced its plan to increase the share of long-dated bonds to finance the government’s economic stimulus programs. Government bonds will comprise 48%–56% of total borrowing in fiscal year 2021–2022. In the previous fiscal year, government bonds comprised 31% of total borrowing as the government relied more on short-term instruments such as promissory notes and Treasury bills. For fiscal year 2021–2022, Treasury bills will comprise 23% of total borrowing, while promissory notes will comprise a 16%–25% share. Savings bonds and bond switching will each account for a 6% share of the total borrowing.