BOT bond issue size to be slashed

Issues of bonds with maturity of one year will be limited to between Bt25 billion and Bt45 billion, down from the outstanding issues of Bt75 billion to Bt135 billion.

Meanwhile, the issue size of fixed-coupon bonds will be reduced from between Bt60 billion and Bt120 billion to between Bt20 billion and Bt40 billion.

The issue size of floating-rate bonds will also be reduced from between Bt48 billion and Bt90 billion to between Bt8 billion and Bt15 billion.

“In 2015, the BOT will reduce the issue size per auction of CMB [cash-management bills] while maintaining those of other maturities, in accordance with the outlook for liquidity conditions and the government’s funding plans. Overall, the large part of BOT bonds issued in 2015 will primarily match the maturing ones,” the central bank said in a statement.

It said it would also consider the prevailing conditions in the money and bond markets when determining the issue size and maturity distribution of the bonds. It will also closely coordinate with the Public Debt Management Office to take into account the forthcoming supply of government bonds and treasury bills.

The BOT will today unveil its revised 2015 economic-growth forecast. Among other things, it will take into account how the current low oil prices, which have hurt the Russian rouble and may spark contagion effects, will affect the Thai economy.

According to Thai Oil, Dubai crude oil moved in a wide range of US$55-$111 per barrel in 2014, averaging $96, down from last year’s average of $106.

The energy company expects Dubai crude to trade at an average of $64 next year as supply will surpass demand.

Though acknowledging that Thailand and other Asean countries would benefit from the plunging oil prices as they are net oil importers, UOB Research foresees a subdued growth outlook for Thailand. Expecting gross domestic product to grow by 0.7 per cent this year – the lowest among Asean nations – it forecasts 2015 growth of 4 per cent.

Given the poor outlooks in Japan, the European Union and China, most economists expect subdued export growth for Thailand next year. As the tourism sector will recover slowly along with domestic consumption and private investment, public spending is expected to be a major growth engine. Year-on-year inflation of 1.60 per cent in November – the lowest in years – was a result of low oil prices as well as weak consumer demand.

In light of this, a year of volatility is expected for the Thai financial market due chiefly to the possibility of the first increased in US interest rates since the 2008 financial crisis. The US Commerce Department’s higher estimate for third-quarter growth, from 3.9 per cent to 5.0 per cent, the best since 2003, fuelled hopes that the US Federal Reserve would start to raise interest rates from current record lows faster than other major central banks, which is a plus for the US dollar.