Thai government bonds and the baht rose this week as President Barack Obama’s re-election increased the likelihood the Federal Reserve will keep boosting the supply of dollars that can be invested in emerging markets.
Foreign funds bought $71 million more sovereign notes than they sold this week through yesterday, Thai Bond Market Association data shows, helping push the benchmark three-year yield to a 21-month low on Nov. 6. Global investors sold a net $64 million of Thai stocks during the period, exchange data show. Obama faces negotiations with a Republican-led House to avoid more than $600 billion of tax increases and spending cuts that are set to take effect in January, the so-called fiscal cliff.
“While there will be plenty of liquidity provided by the Fed, there’s an issue over the fiscal cliff, making investors reluctant to take riskier positions,” said Tohru Nishihama, an economist at Dai-ichi Life Research Institute Inc. in Tokyo. “Funds are coming into emerging markets but investors prefer to buy bonds rather than stocks.”
The yield on the 3.625 percent notes due May 2015 dropped two basis points, or 0.02 percentage point, to 2.83 percent this week as of 3:14 p.m. in Bangkok, according to data compiled by Bloomberg. It fell one basis point today. The benchmark rate reached 2.81 percent on Nov. 6, the lowest since Jan. 17, 2011.
Republican challenger Mitt Romney had said he wouldn’t reappoint Fed Chairman Ben S. Bernanke in 2014. The central bank chief announced a third round of assets purchases in September and said interest rates may remain near zero until mid-2015 to revive growth in the world’s biggest economy.
The baht rose 0.3 percent this week and 0.2 percent today to 30.65 per dollar, according to data compiled by Bloomberg. One-month implied volatility, a measure of exchange-rate swings used to price options, held at 4.27 percent today and this week.