The Thai Bond Market Association (TBMA) expects the capital outflow will continue this year on projections that interest rates in the US will rise in the second half.
"The outflow amount is expected to be on a par with last year," president Tada Phuttitada said yesterday.
In 2014, net outflow from the bond market totalled 26.2 billion baht — outflow was 94.6 billion and net inflow 68.4 billion.
Foreign investors sold more Thai bonds than they bought due mainly to political uncertainty lingering from the fourth quarter of 2013.
The political conflict resulted in total foreign capital outflow of 69.9 billion baht during the first five months of last year — 29.2 billion in short-term bonds and 40.7 billion in long-term offerings.
Mr Tada said local interest rates were likely to be maintained throughout the first half of 2015.
"Interest rates here may rise in the second half of this year at the earliest," he said. "It will be a main factor in the private sector issuing more corporate bonds this year in a bid to lock in funding costs before any rate increase."
Last year, a record was set for corporate bond issues, 554 billion baht from 88 companies, thanks to low funding costs. Of the 88 companies, 24 or more than one-fourth were new issuers.
Mr Tada said this year, demand for raising funds through debentures should continue to grow in terms of the number of issuers. But the amount issued is expected to remain at 520-540 billion baht, close to last year's value, as most issuers are small and medium-sized enterprises.
Low interest rates should also prompt commercial banks to issue bonds to raise their capital base under Basel 3.
The TBMA also urges the government to mobilise funds through the bond market, particularly for infrastructure projects, Mr Tada said.
Regarding demand for investing in the bond market, he said a positive factor would be the government lowering the deposit guarantee ceiling to a maximum of 25 million baht per depositor per bank this year and 1 million next year from the current protection level of 50 million.
TBMA chairman Pisit Lee-atham said the Thai bond market's outstanding value stood at 929 billion baht last year, up by 3.3% from 2013.
Of that amount, government bonds accounted for 37%, bonds issued by the Bank of Thailand 30%, corporate bonds 24%, state enterprise bonds 9% and foreign bonds the rest.