The Public Debt Management Office (PDMO) does not intend to set high coupon rates for government bonds to attract capital inflows for fear of high volatility in the debt market if fund flows are reversed.
A negative interest rate regime in some advanced economies and a firmer baht have triggered offshore fund flows into emerging markets. A fund reversal is expected when developed countries raise their interest rates, said Suwit Rojanavanich, PDMO director-general.
In comparison, Thailand's 10 government bonds carry a coupon rate of 2.17%, well below those of Vietnam and Indonesia at around 7%, the Philippines at 3-4% and Malaysia at 3.7%.
Despite the low coupon rates of Thai government bonds, there is strong demand for them from foreign investors because they consider the baht stable, mitigating the risk of currency losses, he said.
Foreign investor holdings in Thai government bonds amount to 600 billion baht, representing 15% of total government bonds, but still far below the 30% rate in Malaysia and Indonesia. Year-to-date, foreign investors have poured 40 billion baht into Thai government bonds.
Thai government bond maturity averages 9.58 years, shorter than UK government bonds at almost 14 years but longer than many developed countries' government bonds such as the US, Italy and Germany, reported a survey by the OECD and the UK's Debt Management Office. The long maturity reflects investor confidence.
The PDMO plans 440 billion baht in new borrowing and to roll over 517 billion in debt for the next fiscal year, starting from Oct 1. Under its debt management plan for fiscal 2017, the office is set to offer 550 billion baht worth of bonds with maturity of five to 50 years and two batches of savings bonds, said Mr Suwit without elaborating on details.
For the government's infrastructure investments, he said 20.1 billion baht of that budget was disbursed as of July to finance 15 projects worth a combined 297 billion baht. Five of the 20 big-ticket infrastructure projects worth 1.4 trillion baht are now under construction, with seven undergoing bidding and another eight seeking cabinet approval.