Thailand Three-Year Bonds Advance This Week as Policy Rate Cut

Thailand’s three-year government bonds headed for their best week since November and the baht fell as the central bank cut borrowing costs.

The yield dropped to the lowest level since 2010 today after the Bank of Thailand lowered its benchmark interest rate to 2 percent from 2.25 percent on March 12, as expected by 16 of 26 economists surveyed by Bloomberg. The Constitutional Court will consider annulling the Feb. 2 incomplete election and ruled on March 12 that Prime Minister Yingluck Shinawatra’s 2 trillion-baht ($62 billion) infrastructure bill was illegal.

“The rate cut was partly priced in before the meeting, but helped drag down yields and the baht after the decision,” said Kozo Hasegawa, a currency trader at Sumitomo Mitsui Banking Corp. in Bangkok. “Investors are keeping their eyes on political developments and, on that front, will stay on the sidelines for a while.”

The yield on the 4.125 percent bonds due November 2016 dropped 11 basis points this week and one basis point today to 2.59 percent as of 8:33 a.m. in Bangkok, according to data compiled by Bloomberg. That was the biggest weekly decline since the five-day period ended Nov. 29.

Thailand’s National Anti-Corruption Commission extended its deadline for Yingluck to submit her defense statement over accusations of negligence in her role in overseeing the government’s rice-buying program by an extra 15 days from today, the commission said in a statement yesterday.

The baht fell 0.1 percent from March 7 and was little changed today at 32.342 per dollar, data compiled by Bloomberg show. It has weakened 3.7 percent since the anti-government demonstrations began on Oct. 31, the worst performance among Asia’s 11 most-traded currencies after Malaysia’s ringgit.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, declined three basis points this week to 6.55 percent. The gauge fell seven basis points, or 0.07 percentage point, today.

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

To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Andrew Janes, Robin Ganguly

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