Fed rate-cut plan makes Thai bond market ‘attractive’
The US Fed’s plan to cut interest rates will result in more cash entering the Thai bond market, the Public Debt Management Office (PDMO) said.
PDMO bond market adviser Theeraj Athanavanich said investors are seeing Thailand as a favourable destination for their funds.
He said the PDMO had opened a bond switching transaction service last week with a Bt10-billion ceiling. Offers from local and overseas investors were 3.35 times in excess of the limit, which showed that foreign cash is still flowing into Thailand and the country still has high liquidity, he said.
“As soon as the Fed signalled an interest cut, the Bank of Thailand adopted the same approach. So, everyone can be sure that this year Thai interest rates will not increase, and the cost of government loans will not rise,” he said. “The China-US trade war has benefited the Thai finance market, with easy loan approvals and low cost. However, the trade tensions also have adversely impacted our exports and the overall economy.”
With the annual budget being delayed by three months, the PDMO will not be able to ask for further loans until the new budget law comes into effect. Each quarter, the PDMO needs to borrow Bt100 billion to make up the deficit. Nevertheless, to ensure the Thai bond market is not affected, the PDMO must restructure old debt, adjust state enterprise loans and borrow. It is estimated that the loan amount in the last quarter of this year or the first quarter of fiscal year 2020 would be about Bt100 billion, which should be sufficient to oversee the bond market.
“We need to borrow Bt400 billion every year [Bt100 billion per quarter], so if we can’t get the loan from here, the PDMO needs to adjust its loan plans in other areas to make up this shortfall so that the bond market is not affected,” he said. “We have prepared plans and there should not be any problem whatsoever.”
For fiscal 2020, the PDMO can proceed if it knows the scope of the deficit, and it does not have to wait for the budget law to be passed, he said.
“The PDMO can start with the management plan for the 2020 fiscal year, and if there are any changes we can submit them later,” he said, adding, the PDMO is ready to present its debt management plans once the new finance minister takes office.
