Market Summary

Yield Movements

Thailand’s local currency (LCY) government bond yields rose across all tenors between 31 August and 15 October. Double-digit increases in yields were observed for most tenors, averaging 17 basis points, while for the 1-month and 10-, 16-, 20-, and 30-year bonds, yield increases were in single digits. Yields rose during the period on expectations that the Bank of Thailand would soon increase its benchmark policy rate. Rising interest rates, especially in the United States, may have prompted investors to demand higher returns, thus translating into the upward movement in local government bond yields. Uncertainties brought about by contagion fears from the recent emerging market rout and trade tensions also influenced the climb in yields.

Size and Composition

Thailand’s LCY bonds outstanding expanded in the third quarter of 2018 at rates of 2.1% quarter-on- quarter (q-o-q), slower compared with the second quarter of 2018. LCY bonds outstanding reached THB12,174 billion at the end of September, lifted by both the government and corporate segments, which comprised about 72% and 28% of the total, respectively. The amount of total government bonds outstanding reached THB8,808 billion at the end September, reflecting growth of 2.0% q-o-q, while total corporate bonds outstanding grew modestly in third quarter of 2018 at 2.5% q-o-q to THB3,366 billion.

Policy, Institutional and Regulatory Developments

The Thai Bond Market Association is studying the development of a digital token or “bond coin” to facilitate settlement and clearing of corporate bonds. The aim will be to shorten traditional banking processes and corporate bond clearing. The plan will come in three phases: (i) the development of a bond registrar subscription system to record bond transactions between participants; (ii) the inclusion of additional features such as bond deposit servicing and system development; and (iii) structuring of the “bond coin,” which will include a clearing and settlement infrastructure using the digital token.