Thai Bonds, Baht Advance as Central Bank Holds Interest Rates

Thailand’s government bonds and the baht rose as the central bank held borrowing costs at the lowest level since 2011 to support the economy.

The Bank of Thailand left its one-day bond repurchase rate at 2.75 percent today, a move predicted by all 22 analysts surveyed by Bloomberg. Global investors bought $1.1 billion more of the nation’s sovereign debt than they sold this month through yesterday, Thai Bond Market Association data show.

“Risk appetite has been improving globally,” said Yuji Kameoka, chief currency strategist at Daiwa Securities Co. in Tokyo. “But we are not yet in a situation to expect a trend of rising interest rates and that remains supportive for bonds.”

The yield on the 3.625 percent notes due June 2023 fell two basis points, or 0.02 percentage point, to 3.68 percent as of 3:35 p.m. in Bangkok, according to data compiled by Bloomberg. The rate reached 3.70 percent yesterday, the highest level since Sept. 25.

The baht advanced 0.2 percent to 30.38 per dollar, strengthening for a third day and approaching a 10-month high of 30.29 reached on Jan. 3 , according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in exchange rates used to price options, dropped 13 basis points to 4.07 percent.

The central bank will monitor capital flows, it said today after the rate decision. Foreign funds pumped a net $145 million into Thai stocks in the first two days of this week, taking inflows this year to $273 million, exchange data show.

“The BoT’s focus in the near-term will be on the potential impact of volatile capital flows,” said Wee-Khoon Chong, a strategist at Societe Generale SA in Hong Kong. “In other words, more focus will be on the foreign exchange than on interest rates. Intervention to slow the baht’s gains is possible in the future.”

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