Bond issuance to reach B1tn
Long-term corporate bond issuance will likely reach 1 trillion baht this year as the private sector seeks funds to expand business and enhance liquidity, according to the Thai Bond Market Association (TBMA).
The TBMA said the global interest hike will not hurt the Thai bond market's liquidity as much as investors fear because the domestic demand for corporate bonds remains high. Businesses in energy, finance and leasing, property and commerce are expected to be the top issuers this year, said the group.
Tada Phutthitada, president of the TBMA, said the value of long-term debentures issuance in 2021 rose 50% from the previous year and exceeded 1.03 trillion baht for the second time in three years, attributed to increases in both investment grade and high-yield bonds.
Among emerging themes for debentures, sustainability-linked bonds (SLBs) and environmental, social and governance (ESG) bonds are new products gaining popularity as more companies strive to make their businesses more sustainable.
In the past year, there were two issuers of SLBs: Thai Union Group issued a total of 11 billion baht of SLBs and Indorama Ventures issued SLBs worth 10 billion.
Meanwhile, the value of ESG bond issuance in 2021 stood at 153 billion baht, up 77% from 2020, while the total outstanding value of ESG bonds more than doubled from the previous year. This suggests higher ESG awareness among both issuers and investors, said Mr Tada.
The Bank of Thailand and five private companies issued the Thai Overnight Repurchase Rate (THOR) last year, a debt instrument developed to replace the Thai Baht Interest Rate Fixing mark that is due to be discontinued in 2023. The consortium raised the total outstanding value of the product to 307 billion baht at the end of 2021.
The Finance Ministry issued six savings bonds via the Pao Tang app with a total value of 30.2 billion baht.
PTT Exploration and Production became the first company in Asia to successfully offer corporate bonds via blockchain technology last year, with a total value of 6 billion baht.
On Dec 21, 2021, foreign holdings of Thai bonds hit a record high of 1.03 trillion baht, of which 141 billion were long-term and 3.27 billion short-term bonds.
At the end of 2021, foreign investors held 1.02 trillion baht in Thai bonds, or 6.8% of the total outstanding value of the Thai bond market.
At the end of last year, the two-year government bond yield rose by 27 basis points (bps) from 0.39% at the end of 2020 to 0.66%. The five-year bond yield rose by 68 bps from 0.61% to 1.29%, while the 10-year bond yield rose by 61 bps from 1.28% to 1.90%.
Mr Tada said various factors will affect investment in the Thai bond market this year, including rising inflation, the pandemic and the global economic recovery.
The TBMA expects the Thai economy to see a low level of growth this year as the tourism industry has not fully recovered.
The association expects the government bond yields for all maturities to rise this year. The two-year bond is expected to move up by 10 bps to 0.75% at the end of 2022, while the 5- and 10-year bonds are expected to move up around 10 bps and 50-60 bps to 1.7-1.8% and 2.3-2.5%, respectively.