Thai Bonds Rise as Italian Election Results Deter Risk-Taking

Thailand’s government bonds advanced, pushing the 10-year yield to a two-week low, as Italy’s inconclusive elections encouraged investors to favor the relative safety of sovereign debt.

Global funds sold $84 million more Thai equities than they bought yesterday, when the benchmark SET Index of shares dropped 0.6 percent, exchange data show. Pre-election favorite Pier Luigi Bersani won Italy’s lower house by less than a half a percentage point, while Silvio Berlusconi, the former premier fighting a tax-fraud conviction, gained a blocking minority in the Senate.

“Italy’s election uncertainty put investors in a risk-off mood and we could see some asset shifting in Thailand,” said Wee-Khoon Chong, a strategist at Societe Generale SA in Hong Kong. “Domestic investors will possibly switch out of stocks into the safer bonds in uncertain times, and we saw some outflows by foreign investors, too, from Thai equities.”

The yield on the 3.625 percent government notes due June 2023 dropped two basis points, or 0.02 percentage point, to 3.58 percent as of 3:17 p.m. in Bangkok, according to data compiled by Bloomberg. That’s the lowest level since Feb. 11.

Overseas investors bought a net $288 million of Thai government debt yesterday, taking inflows this month to $2.3 billion, Thai Bond Market Association figures show. They have pulled $704 million from the nation’s stocks in February, according to exchange data.

Exports rose 16 percent in January from a year earlier, compared with a 13.5 percent gain the previous month, while imports surged 41 percent, resulting in a trade deficit of $5.5 billion, according to a government report today. The finance ministry said today the economy will continue to expand in the first quarter, driven by local demand and a recovery in exports.

The baht was little changed at 29.83 per dollar, data compiled by Bloomberg show. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped five basis points to 5.27 percent, the lowest level in a month.

Before it's here, it's on the Bloomberg Terminal.