Thai Debt Auctions Fail as Coup Dents Demand for Nation’s Assets

Thailand’s two debt auctions since the military took power in a May 22 coup have both raised less than targeted amid cooling demand for the nation’s assets.

The finance ministry sold 18.157 billion baht ($557 million) of 28-day bills today, less than the 20 billion baht target, the central bank reported. The bid-to-cover ratio was 0.91, marking the first time in six months a sale of that tenor has failed to attract orders for all of the debt offered. The Bank of Thailand sold 28.18 billion baht of 14-day notes on May 23, short of its 30 billion baht goal.

Today’s failed auction may be “a bit of a worry if you see it from a flows perspective,” said Wee-Khoon Chong, Singapore-based head of Asian rates strategy at Nomura Holdings Plc. “Foreigners exiting from markets heighten market volatility. One failed auction does not form a trend and more scrutiny will be needed of auctions from now.”

Waning demand for the nation’s debt may push up borrowing costs in an economy that shrank 0.6 percent in the first quarter from the prior three months. Global funds sold $208 million more of Thai bonds than they bought on May 23, the first day of trading following the coup, according to Thai Bond Market Association data. They also pulled $208.3 million from the nation’s shares that day, boosting last week’s net sales to $600 million.

The baht weakened 0.1 percent today to 32.595 per dollar as of 4:28 p.m. in Bangkok, while the yield on one-month government debt was unchanged at 2.01 percent.

Coup leader Prayuth Chan-Ocha was officially endorsed as the nation’s leader by royal command at a ceremony today in Bangkok, having seized power last week to end six months of political instability and protests that hurt the economy. He said a night-time curfew will remain in force and his junta will enact political reforms, without detailing any changes or providing a timeline for when new elections may be held.

Foreign funds own 16.4 percent of Thai sovereign debt, compared with 34.6 percent in Indonesia, 28.6 percent in Malaysia and 18.3 percent for the Philippines, according to a May 12 report from BNP Paribas SA.

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