Market Summary

Yield Movements

Movements in Thailand's local currency (LCY) government bond yield curve were mixed between 31 August and 30 October. Bonds with maturities of 2 years or below gained 3 basis points (bps) on average, while the 3-year tenor held steady, and the 4-year tenor jumped 10 bps. Meanwhile, yields fell an average of 6 bps for bonds with maturities of 5 years or longer. The spread between the 2-year and 10-year tenors narrowed from 89 bps to 78 bps during the review period. Thailand's benchmark interest rate remained at a record low as the Monetary Policy Committee of the Bank of Thailand (BOT) decided to leave it unchanged at 0.5% in September. Since the beginning of the year, the BOT has reduced the benchmark rate by a total of 75 bps in response to the COVID-19.

Size and Composition

Thailand's LCY bonds outstanding amounted to THB14,018.4 billion (USD443.7 billion) at the end of September on growth of 4.2% quarter-on-quarter and 8.3% year-on-year. Growth in the third quarter of 2020 accelerated from 2.1% quarter-on-quarter and 3.2% year-on-year in the second quarter, driven primarily by strong growth in the government bond segment as the government continued to issue debt to finance relief measures to boost the economy amid the COVID-19 pandemic. Government bonds dominate Thailand's LCY bond market, accounting for a 73.2% share at the end of September.

Policy, Institutional and Regulatory Developments

In August, the Public Debt Management Office issued Thailand's first sustainable government bonds. The issuance was divided in two tranches. The first tranche, amounting to THB10.0 billion, will be used to finance green infrastructure, the Mass Rail Transit's Orange Project. The second tranche, amounting to THB20.0 billion, will be used to finance measures to combat the adverse effects of COVID-19.