Thai Bonds Decline as Yield Jumps at Debt Sale; Baht Strengthens

Thailand’s government bonds dropped for a second day after investors demanded higher yields at a state-debt auction today. The baht advanced as the central bank said volatility remains low.

The government’s borrowing costs rose after the finance ministry sold an additional 8 billion baht ($258 million) of December 2027 notes at 4.07 percent after first selling them in February at 3.7745 percent. Sales of 10- to 50-year debt are also scheduled for May and June. The baht touched 31.07 per dollar yesterday, the weakest level since April 5.

“The market is a bit bearish, especially for long-end notes, due to supply pressure in the coming months,” said Worapoj Peerawit, a bond trader at CIMB Thai Bank Pcl in Bangkok. “Foreigners are still on selling mode due to recent currency weakness.”

The yield on the 3.25 percent bonds due June 2017 rose two basis points, or 0.02 percentage point, to 3.53 percent as of 3 p.m. in Bangkok, according to data compiled by Bloomberg. The yield reached 3.49 percent on April 23, the lowest level since March 12. The yield on the existing 2027 notes jumped three basis points to 4.08 percent after the auction.

The baht gained 0.1 percent to 30.94 per dollar, according to data compiled by Bloomberg. It has declined 0.3 percent this month.

The baht’s one-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 4.52 percent. That was the lowest since July 2011.

The Bank of Thailand isn’t concerned about the baht movements as volatility remains low, Assistant Governor Pongpen Ruengvirayudh told reporters in Bangkok today.

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