Market Summary

Yield Movements

Between 1 March and 15 May, local currency (LCY) government bond yields in Thailand climbed for all tenors except the 6-year and 20-year maturities, which posted slight declines. Thailand’s LCY government bond yields declined earlier this year as bond prices were buoyed by strong investor demand. Toward the end of April, however, bond yields gradually climbed, largely influenced by the rise in yields for United States (US) Treasuries and the broad strengthening of the US dollar. Economic conditions in the US have gained further traction, signaling that the Federal Reserve will proceed with its monetary policy normalization. Tightening liquidity conditions alongside other external risks, including uncertainties relating to rising oil prices and US trade policies, led investors to pull out from most emerging financial markets including Thailand. 

Size and Composition

The size of Thailand’s LCY bond market stood at THB11.4 trillion (USD366 billion) at the end of March, with growth slowing on both a quarter-on-quarter (q-o-q) and year-on-year basis. Growth eased to 1.2% q-o-q in the first quarter of 2018 following a 2.2% q-o-q expansion in the fourth quarter of 2017. On a year-on-year basis, bond market growth slowed to 2.2% from 3.9% in the same period. At the end of March, the total LCY government bond stock rose to THB8.2 trillion and corporate bonds reached THB3.2 trillion. 

Policy, Institutional and Regulatory Developments

In January, the Bank of Thailand raised the frequency of issuance of its 2-year bonds to monthly from the previous schedule of every even month. New issuance of 2-year Bank of Thailand bonds are scheduled for February, May, August, November, while reopenings are scheduled in the months between each new issuance. The maximum issue size for a 2-year bond was also reduced to a range of THB15 billion–THB40 billion due to the increased frequency of issuance. The revision to the issuance plan was made to help ease liquidity conditions. The Bank of Thailand issues bonds for the management of money market liquidity.