Thailand Favors Yen Bonds Over Dollar Debt Amid Negative Rates

The Thai government now favors yen over dollars for issuing foreign-currency bonds to take advantage of lower borrowing costs amid negative interest rates.

The Finance Ministry has studied the possibility of samurai bond sales in case domestic liquidity tightens and coupon rates jump, said Suwit Rojanavanich, director general of the ministry’s Public Debt Management Office. Current ample liquidity in local markets has kept the Southeast Asian nation from tapping overseas markets however, he added.

“We may go to Japan” should Thailand need to issue bonds abroad, Suwit said in an interview Wednesday in Bangkok. “We prefer negative interest rates if we have to go abroad. We have short-term borrowing in yen and we get more than what we want because of negative rates.”

The Bank of Japan’s adoption of a negative-rate policy in January has sent yields on longer-term sovereign debt below zero, making it more attractive for overseas borrowers to tap into yen financing. The Thai government previously said it considered selling dollar bonds, which it hasn’t sold since 2003.

Thailand’s last issuance of samurai bonds was in 2008, when it raised 55 billion yen ($537 million) from the sale. The government sold bonds with maturities of three-, five- and seven-years with coupon rates of as much as 1.45 percent, according to the statement at that time.

The Finance Ministry may sell 550 billion baht ($15.8 billion) of bonds in the next fiscal year starting Oct. 1, PDMO said last week.

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