Rate Swaps Signal Tightening on Inflation Risk: Southeast Asia

Interest-rate swaps in Malaysia and Thailand are signaling central banks will start to tighten monetary policy next year for the first time since 2011, as fighting inflation takes precedence over economic growth.

Malaysian and Thai contracts in which investors exchange a fixed payment for a floating rate for two years climbed to four-month highs of 3.18 percent and 3.08 percent, respectively, in September. Societe Generale SA recommends clients pay the swaps in Malaysia targeting an increase to 3.35 percent. Goldman Sachs Group Inc. raised its forecasts for five-year rates in both countries on Sept. 19.