Thai Bonds Advance as Improving Economy Seen Luring Investment

Thailand’s government bonds advanced on speculation the improving economy will lure more funds from overseas. The baht was steady before trade data tomorrow.

The 10-year yield fell to a two-week low after international investors bought $2.1 billion more sovereign debt than they sold this month through Feb. 22, Thai Bond Market Association data show. Exports climbed 13 percent in January from a year earlier, compared with a monthly average of 3.9 percent in 2012, while imports jumped 19 percent, according to the median estimates of economists surveyed by Bloomberg. The central bank held its policy rate at 2.75 percent last week.

“Economic conditions have been improving but there’s no scope for a rate hike any time soon, making it easier for foreign investors to buy the bonds to bet on strong growth,” said Hideki Hayashi, a researcher at the Japan Center for Economic Research in Tokyo. “The strong economy also means an increase in imports, balancing demand for the baht and the dollar and helping to keep the currency in a tight range.”

The yield on the 3.625 percent government bonds due June 2023 dropped one basis point, or 0.01 percentage point, to 3.6 percent as of 3:12 p.m. in Bangkok from Feb. 22, according to data compiled by Bloomberg. That’s the lowest level since Feb. 12. Onshore markets were closed yesterday for a public holiday.

Gross domestic product increased a record 18.9 percent in the fourth quarter from a year earlier, compared with a revised 3.1 percent gain in the previous three months, the National Economic & Social Development Board said on Feb. 18. GDP rose 6.4 percent in 2012.

Southeast Asia’s second-largest economy will grow more than expected, at a rate of more than 5 percent this year, central bank Governor Prasarn Trairatvorakul said today.

The baht was unchanged at 29.85 per dollar from Feb. 22, data compiled by Bloomberg show. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, held steady at 5.33 percent.

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