Baht Touches 19-Month High After Investors Pump Money Into Bonds

Thailand’s baht touched a 19-month high and government bonds rose as overseas investors pumped the most money into the nation’s debt in three years.

Global funds bought $946 million more sovereign notes than they sold yesterday, the biggest daily net purchase since Bloomberg began compiling the data in March 2010. Prime Minister Yingluck Shinawatra said March 11 the government is targeting an annual growth rate of 4 percent to 5 percent over the long term, after a 6.4 percent expansion in 2012. Fitch Ratings raised its assessment on Thailand by one level to BBB+ last week, citing a resilient economy and a more stable political environment.

“There’s a basic trend of fund inflows to the emerging markets with lots of liquidity provided by central banks in developed nations,” said Tsutomu Soma, the fixed-income business unit department manager at Rakuten Securities Inc. in Tokyo. “Countries like Thailand with a solid growth outlook are especially popular and attract more funds.”

The baht rose 0.1 percent to 29.60 per dollar as of 4:04 p.m. in Bangkok after reaching 29.55 earlier, the strongest level since August 2011, according to data compiled by Bloomberg. The currency has gained 3.3 percent this year, the most in Asia.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped six basis points, or 0.06 percentage point, to 5.16 percent.

Overseas investors bought a net $45 million of local equities yesterday, taking inflows this month to $232 million, exchange data show.

Investor Confidence

The Bank of Thailand isn’t concerned about the baht’s 0.3 percent gain yesterday because the currency moved in both directions in late trade, Governor Prasarn Trairatvorakul said today, adding, it may have strengthened because of rising investor confidence after a rating upgrade from Fitch and upward revisions of economic forecasts.

Royal Bank of Scotland Group Plc estimates Thailand’s economy will expand 4.7 percent in 2013, according to a research note yesterday. It maintained its baht forecast at 29.3 by the end of the second quarter and 29 by year-end.

Thailand rates better than its index peers Malaysia and Indonesia in terms of fiscal account and political stability, and foreign ownership levels of local currency-denominated debt trails the other two nations by a wide margin, BNP Paribas SA said in a note today. Last week, BNP acknowledged the strong scope for inflows to Thai debt and raised its year-end baht prediction to an appreciation to 29 from 29.50, it said.

The yield on Thailand’s 3.625 percent government bonds due June 2023 declined one basis point to 3.64 percent, data compiled by Bloomberg show. The government sold 8 billion baht ($270 million) of notes due 2037 today.

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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