Thai Bonds, Baht Fall This Week as Fed Seen Cutting Stimulus

Thailand’s 10-year government bonds and the baht declined for the week as speculation the Federal Reserve will taper its bond purchases reduced demand for emerging-market assets.

Initial jobless claims in the U.S. fell to the least in almost six years last week, official figures show, while 65 percent of economists surveyed by Bloomberg expect the Fed to cut its $85 billion of monthly bond buying in September. Global funds pulled a net $378 million from local debt this month, according to Thai Bond Market Association data, amid concern an amnesty bill for political protesters will hinder a development spending plan.

“Money has been flowing out from riskier assets due to speculation of the Fed’s tapering,” said Koji Fukaya, chief executive officer and foreign-exchange strategist at FPG Securities Co. in Tokyo. “For domestic factors, the risk is that the infrastructure spending plan will be delayed, further slowing economic growth.”

The yield on the 3.625 percent sovereign notes due June 2023 rose six basis points this week and three basis points today to 3.98 percent as of 3:39 p.m. in Bangkok, according to data compiled by Bloomberg.

Parliament is currently reviewing a proposal to pardon individuals involved in demonstrations after former Prime Minister Thaksin Shinawatra was toppled in a 2006 coup. Prioritizing the legislation may mean they won’t have time to vote on a 2 trillion baht ($64 billion) spending plan to build railways, roads and ports.

An official report on Aug. 19 may show gross domestic product increased 3.3 percent in the second quarter from a year earlier, after rising 5.3 percent in the first three months of this year, according to the median estimate of economists in a Bloomberg survey.

The baht weakened 0.1 percent from a week ago to 31.28 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 three basis points, or 0.03 percentage point, to 6.25 percent this week.

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