The Bank of Thailand (BoT) has cut the amount of short-term bonds it will sell via auction in August to help slow fund inflows amid a strong baht, while traders said yields continue to fall on expectations of an interest rate cut.
The supply of three-and six-month bonds was cut by a combined 20 billion baht in August, compared with July's amount, the BoT said in a statement on Friday.
That follows July's supply reduction of such bonds by a combined 50 billion baht, compared with June.
Earlier this month, the central bank also issued measures against speculative fund inflows and was ready to use additional tools if needed.
Cutting bond supply is among the measures, according to BoT Governor Veerathai Santiprabhob.
The baht has gained about 5.6% against this year, becoming the best performing currency in Asia, driven by fund inflows.
"The BoT's measures haven't made the baht weaken as fast as they expected," said Kris Na Songkhla, executive vice president of Krungthai Asset Management.
"That's because other countries cut rates, so foreign funds are flowing into countries that don't".
The BoT left its benchmark interest rate unchanged at 1.75% in June, for a fourth straight meeting, after raising it in December for the first time since 2011. It will next review policy on Aug 7.
However, foreign investors have sold a net 22 billion baht of bonds since the central bank's measures.
At Tuesday's auction, yields eased, reflecting expectations of a rate cut, possibly late this year, traders said.
The accepted yield of 182-day bonds dropped to 1.74913% from 1.74938% at the previous auction, while the yield on 91-day bonds eased to 1.74982% from 1.75127%.