Market Summary

Yield Movements

Between 28 February and 15 May, the local currency (LCY) government bond yield curve in Thailand shifted downward at the shorter-end and slightly upward at the long-end. Yields fell an average of 28 basis points for tenors with maturities of up to 6 years, while yields rose an average of 9 basis points for maturities of 7 years or longer. The decline in yields at the shorter-end of the curve stemmed primarily from the easing of the Bank of Thailand's (BOT) monetary policy in response to the economic headwinds brought by the coronavirus disease (COVID-19). Declining growth prospects and heightened risk, which resulted in capital outflows, caused the uptick on long-term bond yields.

Size and Composition

Thailand's LCY bonds outstanding amounted to THB13,168.9 billion (USD402.1 billion) at the end of March after a 0.5% quarter-on-quarter contraction in the first quarter of 2020. Contraction in the government bond segment, coupled with tepid growth in the corporate bond segment, drove the quarterly decline in outstanding LCY bonds. On an annual basis, the growth of outstanding LCY bonds decelerated to 4.1% in Q1 2020 from 16.0% in the previous quarter. The Thai bond market is largely composed of government bonds, which accounted for 71.0% of the total bonds outstanding at the end of March.

Policy, Institutional and Regulatory Developments

In March, Thailand's Public Debt Management Office adjusted its bond issuance plan to include shorter-dated bonds amid weak demand for government bonds due to heightened uncertainties caused by the COVID-19 pandemic.