Thai Bonds Rise on Inflows Amid Rate-Cut Speculation; Baht Falls

Thailand’s government bonds rose, pushing the three-year yield to a 10-month low, after international investors boosted holdings on speculation the central bank will lower borrowing costs. The baht fell.

The Bank of Thailand cut its 2013 growth forecast to 4.6 percent on Oct. 26 from a previous estimate of 5 percent, after unexpectedly reducing its policy rate by a quarter of a percentage point to 2.75 percent on Oct. 17. Foreign funds bought $1.9 billion more Thai sovereign notes than they sold in October, while paring stock holdings by a net $582 million, data from the Thai Bond Market Association and stock exchange show.

“The funds are flowing into Asia, and for Thailand capital is going to bonds rather than stocks,” said Kozo Hasegawa, a Bangkok-based foreign-exchange trader at Sumitomo Mitsui Banking Corp. “There are some investors who see a chance of more rate cuts” after the central bank lowered its economic expansion estimate, he said.

The yield on the 3.625 percent notes due May 2015 fell five basis points, or 0.05 percentage point, to 2.86 percent as of 3:28 p.m. in Bangkok, according to data compiled by Bloomberg. That was the lowest level since Dec. 14, 2011. The Bank of Thailand will next meet to review monetary policy on Nov. 28.

The baht fell 0.1 percent to 30.71 per dollar, according to data compiled by Bloomberg. One-month implied volatility, a measure of exchange-rate swings used to price options, rose 27 basis points to 4.27 percent.

To contact the reporter on this story: Yumi Teso in Bangkok at yteso1@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.

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