Bonds advance, baht steady

Thailand's government bonds advanced on speculation the improving economy will lure more funds from overseas. The baht was steady before trade data on Wednesday.

The 10-year yield fell to a two-week low after international investors bought US$2.1 billion more sovereign debt than they sold this month through Feb 22, Thai Bond Market Association data show. Exports climbed 13% in January from a year earlier, compared with a monthly average of 3.9% in 2012, while imports jumped 19%, according to the median estimates of economists surveyed by Bloomberg. The central bank held its policy rate at 2.75% last week.

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"Economic conditions have been improving but there's no scope for a rate hike any time soon, making it easier for foreign investors to buy the bonds to bet on strong growth," said Hideki Hayashi, a researcher at the Japan Centre for Economic Research in Tokyo. "The strong economy also means an increase in imports, balancing demand for the baht and the dollar and helping to keep the currency in a tight range."

The yield on the 3.625% government bonds due June 2023 dropped two basis points, or 0.02 percentage point, to 3.59% as of 8.37am in Bangkok from Feb 22, according to data compiled by Bloomberg. That's the lowest level since Feb 12. Onshore markets were closed on Monday for a public holiday.

Gross domestic product increased a record 18.9% in the fourth quarter from a year earlier, compared with a revised 3.1% gain in the previous three months, the National Economic and Social Development Board said on Feb 18. GDP rose 6.4% in 2012.

The baht was unchanged at 29.85 per dollar from Feb 22, data compiled by Bloomberg show. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped eight basis points to 5.25%, the lowest level in a month.

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