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Thai Five-Year Yield at 11-Week High on Rate Outlook; Baht Falls

Dec. 19 (Bloomberg) -- Thailand’s five-year government bonds fell, pushing the yield to an 11-week high, on speculation the central bank won’t need to cut interest rates as the global economy improves. The baht declined.

U.S. House Speaker John Boehner is trying to sell a tax rise for top earners to fellow Republicans to reach a deal to avert more than $600 billion of automatic spending cuts and tax increases in the world’s largest economy. The Bank of Japan, which ends a two-day meeting tomorrow, will probably boost monetary stimulus, 17 of 21 analysts surveyed by Bloomberg forecast. Thai consumer prices rose 2.7 percent in November from a year earlier, the least in three months, official data show.

Bond yields are climbing because of “the improving outlook for the global economy and risk assets,” said Jens Lauschke, a fixed-income strategist at DBS Group Holdings Ltd. in Singapore.

The yield on the 5.125 percent bonds due March 2018 increased one basis point, or 0.01 percentage point, to 3.31 percent as of 3:19 p.m. in Bangkok, according to data compiled by Bloomberg. That was the highest level since Oct. 2. The yield has risen five basis points this year.

The central bank kept its benchmark interest rate unchanged last month after an unexpected cut in October, and signaled it may be done with easing.

Thailand’s economy may expand 5.8 percent in 2012, compared with an earlier prediction of 5.7 percent, Bank of Thailand Governor Prasarn Trairatvorakul said at a seminar in Bangkok on Dec. 13. The economy may grow 4.7 percent next year, higher than the previous 4.6 percent projection, he said.

The baht fell 0.1 percent to 30.60 per dollar, according to data compiled by Bloomberg. The currency has appreciated 3.1 percent this year. One-month implied volatility, a measure of exchange-rate swings used to price options, increased two percentage points, to 4.30 percent.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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