Latest savings bond rate attractive, insists PDMO

The Finance Ministry will issue bonds worth Bt80 billion, with sales to the elderly first and then to other retail investors, the PDMO said.
The bonds will be available on September 3-4 for those aged 60 and over. Each subscriber can invest up to Bt2 million, while the minimum investment is Bt1,000.
The bonds will be sold to other retail investors from September 5-7, with the same maximum and minimum invest ment levels. If any of the bonds remain unsold after the subscription periods, they will be made available to all retail investors, regardless of age and without a maximum investment amount. The minimum investment will, however, still be Bt1,000.
Those interested in snapping up the savings bonds should contract one of the four banks at which they are being sold, PDMO director-general Chakkrit Parapuntakul said yesterday.
The banks are Krung Thai Bank, Kasikornbank, Siam Commercial Bank and Bangkok Bank. The bonds are not available, however, through Bangkok Bank’s micro-branches.
Investors can subscribe to the bonds over the banks’ counters or via ATMs. The bonds are scripless, and those wanting to receive paper bonds will have to pay fee, he said.
Investors will be paid a twice-yearly investment return.
The coupon rate of 3.99 per cent per annum is attractive when compared with corporate bonds with a similar maturity, where the rate is usually about 4 per cent, he said, adding that government bonds are risk-free while corporate issues carry a default risk.
Moreover, the yield of existing government bonds with a six-year maturity is currently 3.2 per cent, said Chakkrit.
The savings bonds are the final government bond issue this year, with the series aimed at financing a budget deficit of Bt400 billion. The fiscal year ends on September 30.
The latest issue also serves the purpose of promoting the overall bond market, he said, adding that the government is likely to issue further saving bonds next year.
The government next year is expected to borrow about Bt1 trillion. It needs to raise funds to finance a budget deficit of Bt300 billion, and requires Bt350 billion for flood prevention and Bt50 billion for a catastrophe insurance fund. State enterprises also plan to borrow to finance their investment projects.
However, the estimated borrowing of Bt1 trillion is unlikely to push interest rates up, said Chakkrit.
Meanwhile, a financial-market source said the government bond coupon rate of 3.99 per cent was quite attractive when compared with bank deposit rates, which are lower.
Global interest rates over at least the next two years are unlikely to rise due to the worldwide economic slump, he said.
The US and Europe are unlikely to fully recover from their economic woes within such a time frame, the source added.