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CAPITAL MARKETS

Central bank sells longer bonds to reduce instability

20/03/2012

The Bank of Thailand is issuing bonds with longer maturities to reduce local market volatility caused by foreign capital inflows.

Pongpen Ruengvirayudh, assistant governor of the bank's Financial Markets Operations Group, said the central bank has been selling bonds over the past year with longer maturities, ranging from about six months to three years.

The baht strengthened to 30.69 to a US dollar yesterday from 30.73 on Friday, a 0.13% rise. Ms Pongpen said the central bank has not been intervening in the market very much recently.

"A gradual appreciation of the baht is positive for the economy when energy prices are rising," she said.

Ms Pongpen added that a lessening of market concerns about Europe's sovereign debt crisis following the Greek debt restructuring agreement has resulted in a return of foreign capital to the region.

Foreign investors arbitraging interest rate differences between overseas and local markets and buying Thai stocks and bonds has led to the baht's appreciation. The central bank does not believe the short-term investment inflows are excessively speculative.

"We do not consider the inflows hot money. Investors normally look for short-term investments during times of high global uncertainty and fast-changing news," she said.

(Source: Bangkok Post, CAPITAL MARKETS, Central bank sells longer bonds to reduce instability, 20/03/2012, link)

Capital Market Vocabulary

capital - money invested in a business (See glossary)
capital markets - the markets and stock exchanges where companies and governments sell shares, bonds, etc. in order to obtain investment money to run their businesses (See Wikipedia)

central bank - the main and largest bank in a country that sets monetary policy and controls the supply of money, credit and loans in an economy and provides financial services to the government and banks, during an economic crisis is the lender of last resort (See Wikipedia)

lender of last resort - when a country's central bank lends money during a crisis to banks that do not have enough money to pay depositors withdrawing their money from the bank (bank run) (See Wikipedia)

bonds - an agreement by a government or an organization to pay back the money an investor has lent plus a fixed amount of interest on a particular date; a document containing this agreement (See Wikipedia)
instability - unstable, can change suddenly without notice, this makes it difficult to work with

central bank sells longer bonds to reduce instability

issuing - officially giving something to people ออกคำสั่ง
issuing bonds

maturity - the life of a bond or other security; for a bond the length of time that money is lended for
volatility - when prices move suddenly in unexpected ways; a measure of risk in financial markets, the degree to which asset prices swing up and down (See glossary) ความไม่แน่นอน อัตราความเสี่ยงต่อการลงทุนทางการเงิน
local market volatility
foreign capital inflows - investment money coming into the country from other countries

The Bank of Thailand is issuing bonds with longer maturities to reduce local market volatility caused by foreign capital inflows. Pongpen Ruengvirayudh, assistant governor of the bank's Financial Markets Operations Group, said the central bank has been selling bonds over the past year with longer maturities, ranging from about six months to three years.

intervening in the market - when the central bank buys and sells Thai baht to influence the exchange rate
exchange rate - the relation in value between the currencies of two countries (See Wikipedia)
currency - the system of money that a country uses; the value of a country's money (See Wikipedia)

gradual - moving slowly
appreciation - when a country's currency becomes more valuable compared to the currencies of other countries (which makes goods exported from the country more expensive)
gradual appreciation of the baht - the slow increase in value of the Thai baht

positive - something good ที่ดี ในแง่ดี สิ่งที่ดี   good  hopeful and confident, or giving cause for hope and confidence ซึ่งมองในแง่ดี
positive for the economy - a good thing for the economy
energy prices - the price of oil and natural gas

a gradual appreciation of the baht is positive for the economy when energy prices are rising - one reason: makes more expensive foreign oil and natural gas cheaper

The baht strengthened to 30.69 to a US dollar yesterday from 30.73 on Friday, a 0.13% rise. Ms Pongpen said the central bank has not been intervening in the market very much recently. "A gradual appreciation of the baht is positive for the economy when energy prices are rising," she said.

concerns - things or issues that people worry about and think a lot about ความกังวล
market concerns

sovereign - related to a country and its government เอกราช อำนาจอธิปไตย
debt - an amount of money that you owe หนี้
crisis - an urgent, difficult or dangerous situation วิกฤตการณ์ วิกฤต

sovereign debt - government debt that has been issued in a foreign currency (See Wikipedia)
sovereign debt crisis - when a country is unable to pay back the money it borrowed to pay for government spending, because it borrowed in a foreign currency and the exchange rate changed, for example (See Wikipedia)
debt restructuring - when the terms of a loan are changed to make it easier to pay back (See Wikipedia)

Ms Pongpen added that a lessening of market concerns about Europe's sovereign debt crisis following the Greek debt restructuring agreement has resulted in a return of foreign capital to the region.

interest - payments made for the use of another's money for a period of time
term - a period of time
short-term - for a short period of time in the future (for example, less than one year)

arbitrage - the practice of buying something in one place and selling it in another place where the price is higher (foreign currencies or stocks, for example) (See Wikipedia)
arbitraging interest rate differences

interest rate - the cost of borrowing money, usually expressed as a percentage of the amount borrowed
stocks - stock shares in a company, all the shares giving part ownership of a company that the company makes available (See Wikipedia)

investment - taking your money and putting it into projects to make a profit or earn interest (buying stock shares, bonds, real estate)
short-term investment inflows

speculation (noun) - buying assets such as stock shares, property, goods, etc. only to make a profit by selling them when their price goes up (but of course with the risk of losing money) not to make any productive use of the asset (See Wikipedia)
speculate (verb) 
speculative (adjective)
excessively - too much
excessively speculative - too much speculation for profit and not enough productive use of assets (for long term growth of economy)

Foreign investors arbitraging interest rate differences between overseas and local markets and buying Thai stocks and bonds has led to the baht's appreciation. The central bank does not believe the short-term investment inflows are excessively speculative.

hot money - money that is moved quickly between countries in order to make profits from changes in interest rates or in the value of currencies 
global - throughout the world ทั่วโลก
uncertainty - when people do not know what is happening or will happen in the future
high global uncertainty

"We do not consider the inflows hot money. Investors normally look for short-term investments during times of high global uncertainty and fast-changing news," she said.

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