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Trading on bond market in February drops 11.9 per cent in value

Mar 03. 2015
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By Kantiros Rangkasikorn,

Inflation is expected to remain low as the United States Federal Reserve is unlikely to raise interest rates soon. The Thai bond market in February continued to face an outflow of foreign capital.

The Thai Bond Market Association’s registered bonds as of February 20 totalled 2,834 issues with outstanding value of Bt9,259,752.78. In the February 1-20 period, the values of new bond issues amounted to Bt12,228 million, while new commercial-paper issuances amounted to Bt53,556 million.

Issuances of government debt securities in February were:

nFour issues of government bonds (LB), totalling Bt26,160 million

n11 issues of state-agency bonds (SA), totalling Bt336,571 million

nNo state-owned-enterprise bonds (SOE)

From February 1 to 20, total trading value amounted to Bt1,101,369 million, decreasing 11.9 per cent from the previous month. Trading activities were concentrated in SA bonds, which accounted for Bt679,946 million or 69 per cent of the total outright trading value.

Government bonds captured 25 per cent of the total trading value or Bt280,643 million, an increase of 9.5 per cent. During the same period, corporate bonds’ trading amounted to Bt29,757 million in value, representing a jump of 107.5 per cent from the previous month.

Yields of government bonds with less than one-year maturity increased slightly, in the range of +0.01 to +0.02 per cent. Meanwhile, yields of government bonds with maturity longer than one year moved up in the range of +0.03 to +0.19 per cent in line with US Treasury yields.

After US total non-farm payroll employment rose by 257,000 in January and the unemployment rate was little changed at 5.7 per cent, February was the 11th month in a row of having more than 200,000 units of employment. Improvement of the US labour market boosted the yield of 10-year bonds to more than 2 per cent. It also dragged up the 10-year yield of Thai bonds.

In addition, foreign-capital outflow continued from January, affecting the increment of medium-to-long-term Thai bonds, with five-year bonds rising 0.16 per cent and 10-year bonds 0.19 per cent.

The year-to-date return from investing in government bonds as of February, measured with the government bond total return index, was +0.72 per cent, while the year-to- date return from investing in corporate bonds, measured with the corporate bond total return index, was +0.54 per cent.

In February, there was Bt5,038 million in net outflow of foreign capital from the bond market, which was much lower than the January figure of Bt2,100 million.

The major outflow occurred in short-term bonds with maturity less than one year, totalling Bt4,472 million, while long-term-bond outflow amounted to 565 million.

Most of the outflows in short-term bonds were a result of bond expiration.

Outlook for March

A decline in oil prices is expected to keep inflation low while global sentiment improves. After the European Union agreed to extend Greece’s debt deal for four months, Fed chair Janet Yellen said the US central bank would not raise interest rates for the next two meetings, which means the short-term interest rate may stay unchanged for the next period.

Kantiros Rangkasikorn, the author, is analyst officer, research and development department, Thai Bond Market Association. [email protected], 02-252-3336 Ext 355,

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