Thai Bonds Decline on Emerging-Market Exit Before Rate Decision

Thailand’s bonds fell, with the two-year yield posting its biggest increase since May, amid a selloff in emerging markets before tomorrow’s central bank meeting.

The yield on the 4.125 government securities due November 2016 climbed six basis points to 2.14 percent as of 4 p.m. in Bangkok, according to data from the Thai Bond Market Association. The rate on the June 2023 bonds rose six basis points, or 0.06 percentage point, to 2.77 percent.

The 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 pace since 2011. Only six of 21 analysts surveyed by Bloomberg predict the central bank will lower the benchmark rate tomorrow and the rest forecast no change from 2 percent after inflation slowed.

“Sentiment is weak toward emerging markets as a whole and maybe they also see some outflows weighing on bonds,” said Kozo Hasegawa, a foreign-exchange trader at Sumitomo Mitsui Banking Corp. in Bangkok. “Local stocks have dropped, inflation is slowing and the economy remains sluggish, providing room for the Bank of Thailand to cut rates.”

Hasegawa said he expects policy makers to stay on hold this week. The central bank has left its benchmark unchanged since March, when it cut it by 25 basis points.

Consumer-price increases eased to 1.26 percent in November from a year earlier, the slowest in five years.

Stocks Fall

The Stock Exchange of Thailand Index fell 1.4 percent, headed for its lowest close since June. The gauge has dropped 9 percent in six days as overseas funds sold $354 million more of the nation’s equities than they bought this month through yesterday. The MSCI AC Asia Pacific Index lost 0.6 percent.

Thailand’s baht rose 0.1 percent to 32.969 per dollar, data compiled by Bloomberg show. It’s fallen this quarter along with 22 of the 24 emerging-market currencies tracked by Bloomberg. While the baht has dropped 1.7 percent since the end of September, the decline is less than losses of 6 percent for Malaysia’s ringgit and 4.2 percent for Indonesia’s rupiah.

The Bank of Thailand has no plan to impose measures to limit fund outflows, Governor Prasarn Trairatvorakul told reporters in Bangkok today. No unusual capital outflows have been detected, and the baht has moved in line with regional currencies, he said.

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