Market Summary

Yield Movements

Between 1 March and 8 May, the local currency (LCY) government bond yields in Thailand rose slightly for tenors with maturities of up to 2 years, and dropped marginally for most tenors with maturities of at least 3 years. The marginal downward shift of the yield curve resulted from expectations that the policy rate would be kept at its current level of 1.75%. In its monetary policy meeting on 20 March, the Bank of Thailand (BOT) decided to keep its policy rate unchanged as the economy expanded at a slower pace in the first quarter (Q1) of 2019 amid weakening external demand.

Size and Composition

Thailand's LCY bond market rose 1.6% quarter-on-quarter (q-o-q) in Q1 2019 to THB12,649 billion (USD399 billion) from THB12,445 billion (USD382 billion) in the fourth quarter of 2018. On a year-on-year basis, the LCY bond market expanded 10.9%. Growth was buoyed by expansions in both the government and corporate sectors. The outstanding stock of LCY government bonds rose 1.4% q-o-q to THB9,111 billion, while the outstanding stock of LCY corporate bonds grew 2.3% q-o-q to THB3,538 in Q1 2019. The Thai bond market largely comprises government bonds, which accounted for 72% of total bonds outstanding at the end of Q1 2019.

Policy, Institutional and Regulatory Developments

The BOT and Bank Indonesia signed a memorandum of understanding on 4 April to strengthen payment systems and financial innovation cooperation between Thailand and Indonesia. The agreement also aims to improve the implementation of central bank policies and address the increasingly complex challenges in payments between the two economies. It will also reinforce the implementation of policies against money laundering and terrorism financing.