Thai Bonds Decline After Central Bank Says No Need to Cut Rates

Thailand’s government bonds fell, pushing the 10-year yield to a two-week high, after central bank Governor Prasarn Trairatvorakul said there is no need to cut interest rates. The baht was little changed.

Inflation remains “benign” and the economy will grow 5.7 percent this year as domestic demand counters a slowdown in exports, Prasarn said Oct. 13. Expansion was 0.1 percent in 2011 as the nation was affected by the worst flooding in almost 70 years. The Bank of Thailand will keep its benchmark rate at 3 percent tomorrow, according to 20 of 23 economists surveyed by Bloomberg, with three predicting a 25 basis point cut.

“The yields aren’t falling for now with growing speculation of no rate reduction this week,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Still, the impact from the BOT decision will be rather limited.”

The yield on the 3.65 percent bonds due December 2021 rose one basis point to 3.51 percent as of 3:05 p.m. in Bangkok, the highest level since Sept. 28, according to data compiled by Bloomberg. The yield advanced two basis points, or 0.02 percentage point, yesterday.

Consumer prices rose 3.38 percent in September from a year earlier, compared with a 2.69 percent increase in August, official data show.

The baht traded at 30.67 per dollar, compared with 30.68 yesterday, according to data compiled by Bloomberg. One-month implied volatility, a measure of exchange-rate swings used to price options, was unchanged at 4.27 percent.

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