Thai Bonds Has Second Weekly Loss on Stock Rally; Baht Advances

Thailand’s 10-year bonds had a second weekly decline as an improving outlook for the economy spurred demand for riskier assets. The baht rose for a third straight week.

The benchmark SET index of shares reached its highest level since 1994 as a report from the University of the Thai Chamber of Commerce showed yesterday a consumer sentiment index rose to 84 in February, the highest since July 2011. Bank of Thailand Deputy Governor Pongpen Ruengvirayudh said yesterday the monetary authority’s 2013 growth estimate of 4.9 percent, made in January, will “most likely” be revised up to more than 5 percent and the benchmark interest rate of 2.75 percent is “accommodative.”

“Local optimism on potential growth in Thailand is making the outlook for stocks more bullish than bonds,” said Wee-Khoon Chong, a rates strategist in Hong Kong at Societe Generale SA. “The economy is growing and strong, and no prospect of monetary easing by the central bank is making bonds less attractive.”

The yield on Thailand’s 3.625 percent government notes due June 2023 rose three basis points, or 0.03 percentage point, to 3.65 percent as of 3:48 p.m. in Bangkok, according to data compiled by Bloomberg. The rate fell one basis point from yesterday when it reached the highest level since Feb. 4.

Global funds bought $17 million more local equities than they sold this week through yesterday and offloaded a net $37 million of sovereign debt, official data show.

The baht rose 0.1 percent this week to 29.75 per dollar and was little changed today, data compiled by Bloomberg show. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped seven basis points this week to 5.21 percent. It rose 13 basis points today.

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