Thai Bonds Extend Rally as Slowing Inflation Fuels Rate-Cut Bets

Thailand’s bonds rose for a sixth week on speculation the slowest inflation in five years will give the central bank room to cut interest rates and spur economic growth.

The yield on government notes due in June 2023 dropped six basis points to 2.7 percent from Dec. 5 in Bangkok, the lowest level in at least four years and taking the decline since Oct. 31 to 40 basis points, Thai Bond Market Association data show. The baht climbed 0.7 percent for the week to 32.789 per dollar, according to data compiled by Bloomberg.

Thailand’s economy will expand no less than 1 percent this year, Prime Minister Prayuth Chan-Ocha said in a Dec. 3 speech to the Joint Foreign Chambers of Commerce in Bangkok. That would be the slowest annual growth rate since 2011. A slump in crude oil prices may offer further relief on the inflation front in a nation that’s a net importer of the fuel and saw annualized consumer-price increases ease to 1.26 percent in November.

“Some investors are speculating on an interest-rate cut with the economy remaining sluggish and inflation slowing,” said Kozo Hasegawa, a foreign-exchange trader at Sumitomo Mitsui Banking Corp. in Bangkok. “That will continue to put downward pressure on yields.”

Thailand’s local-currency bonds climbed 0.4 percent for the week across all maturities, a Bloomberg index shows. The gauge reached a record 129.79 today.

The Bank of Thailand meets to set interest rates on Dec. 17, and 16 of the 18 economists surveyed by Bloomberg forecast no change and two a 25 basis-point cut.

Hasegawa said the central bank will keep the policy rate unchanged next week, predicting a range for the Thai currency of 32.65 to 32.95.

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