Thai Bonds Attract Global Funds Amid Rate Cut Anticipation and Strong Baht

Global investors have been piling into Thai bonds in April, with over 67 billion baht flowing into the market.

This surge marks the largest monthly influx of capital in over three years, since February 2025, according to reports from Bloomberg News.

The primary drivers behind this interest are widespread expectations that the Bank of Thailand (BOT) will trim its key interest rate in the near future, coupled with a robust appreciation of the Thai baht.

The stronger baht is partly attributed to the soaring price of gold on global markets.

Data from the Thai Bond Market Association (ThaiBMA) indicates that international funds have already pumped approximately $2 billion (around 67 billion baht) into Thai debt instruments this month, representing the most significant inflow into the bond market in more than three years.
 

Wachirawat Banchuen, a senior market strategist at Siam Commercial Bank, explained that the substantial wave of capital entering the Thai bond market in recent weeks stems from the anticipation of further policy rate reductions by the BOT to bolster economic growth.

Notably, the majority of these funds are being invested in short-dated bonds, a clear indication that investors are confident in the continued strengthening of the baht.

Interestingly, while Thailand is experiencing a consistent influx of funds into its bond market, neighbouring nations such as India and Indonesia are witnessing capital outflows.

This divergence is attributed to the market's perception of Thailand's resilience amidst global market turbulence, a stark contrast to the previous year when Thailand's bond market faced net outflows due to domestic political uncertainties.

Edward Ng, a fund manager at Nikko Asset Management Group, offered his perspective, noting that the correlation between Thai government bonds and US Treasuries appears to be weakening.
 

This decoupling helps to cushion the impact of global market volatility. Furthermore, the stellar performance of gold is enhancing the baht's appeal as an asset for investors.

Economists predict that the US Federal Reserve (the Fed) is poised to announce its second interest rate cut of the year on Wednesday, 30th April 2025. This anticipated move is also galvanising global investors to acquire bonds in pursuit of higher yields.

The unprecedented climb in gold prices is another crucial factor bolstering the attractiveness of Thai assets. Thailand holds a prominent position as a key gold trading centre in Asia, boasting the highest proportion of gold reserves compared to its regional counterparts. Moreover, Thailand's gold exports have surged by a remarkable 270% compared to the same month last year.

Adding to this, since the United States implemented import tariffs on 2nd April 2025, the Thai baht has appreciated by over 2% in the same period, while gold prices have climbed by approximately 7%.