Thai Government Bonds Snap Two-Day Drop on Inflows; Baht Falls

Thai government bonds rose, snapping a two-day decline, as President Barack Obama’s re-election boosted speculation the Federal Reserve will maintain policies that have spurred fund flows to emerging markets.

Global funds bought $241 million more local sovereign debt than they sold in the first three days of this week, according to data from the Thai Bond Market Association. The MSCI (MXAP) Asia Pacific Index dropped and the baht weakened as Obama faces negotiations with Congress to avoid the so-called fiscal cliff of more than $600 billion in tax increases and spending cuts next year that threaten to slow U.S. growth.

“Funds are flowing to Asia due to monetary easing in developed nations and Obama’s re-election means such policy will continue,” said Tsutomu Soma, manager of the investment trust and fixed-income business unit at Rakuten Securities Inc. in Tokyo. “Regional currencies are seeing some downward pressure amid declines in stocks on the fiscal cliff.”

The yield on the 3.65 percent notes due December 2021 fell one basis point, or 0.01 percentage point, to 3.35 percent as of 9:27 a.m. in Bangkok, according to data compiled by Bloomberg. The rate reached 3.30 percent on Nov. 1, the lowest level since August.

Obama’s Republican challenger Mitt Romney had said he wouldn’t reappoint Fed Chairman Ben S. Bernanke in 2014. The central bank chief enacted a third round of assets purchases in September and said interest rates may remain near zero at least until mid-2015 to revive growth in the world’s biggest economy.

The baht lost 0.1 percent to 30.69 per dollar, according to data compiled by Bloomberg. One-month implied volatility, a measure of exchange-rate swings used to price options, was steady at 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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