Thai Bonds Advance as Export Slump Deepens; Baht Strengthens

Sept. 25 (Bloomberg) -- Thailand’s government bonds advanced as data showing exports fell more than economists predicted last month boosted demand for safer investments. The baht strengthened

Overseas sales dropped 6.95 percent in August from a year earlier, following a 4.46 percent decrease in July, the commerce ministry said in a statement today. They were expected to fall 5.8 percent, based on the median estimate in a Bloomberg News survey of 17 economists. The finance ministry cut its forecast for economic expansion in 2012 today. The central bank kept its benchmark interest rate at 3 percent on Sept. 5.

“The data confirms the tough external environment and sentiment is quite supportive of bond markets at this moment,” said Kozo Hasegawa, a Bangkok-based foreign-exchange trader at Sumitomo Mitsui Banking Corp. “Many still see the rate to be on hold, but a rate cut can’t be completely ruled out.”

The yield on the 3.65 percent bonds due December 2021 fell four basis points or 0.04 percentage point, to 3.64 percent, according to data compiled by Bloomberg. The yield reached 3.71 percent on Sept. 17, the highest level since May.

The government is scheduled to auction 12 billion baht ($388 million) of notes due 2023 tomorrow. It last sold like-maturity securities on Sept. 11 at 3.686 percent.

Gross domestic product will increase 5.5 percent this year, compared with an earlier projection of 5.7 percent, Somchai Sujjapongse, head of fiscal policy office at the finance ministry, said in Bangkok today. The economy will expand 5.2 percent in 2013, he said. Inflation will average 3.3 percent this year and 3.5 percent in 2013, Somchai estimated.

The baht strengthened 0.1 percent to 30.92 per dollar, according to data compiled by Bloomberg. It weakened 0.4 percent yesterday, the biggest loss since July 18. One-month implied volatility, a measure of exchange-rate swings used to price options, rose 42 basis points to 4.27 percent.

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