Yield curve of state 10-year bonds rises

Yield curve of state 10-year bonds rises

Moves in line with US Treasuries yield

The yield curve of government bonds had already risen even before the Bank of Thailand's policy rate hike, which also reflected the policy rate hikes of the US Federal Reserve, according to the Public Debt Management Office (PDMO).

The PDMO's director-general Patricia Mongkhonvanit said the yield curve of the 10-year government bonds has risen, in line with the 10-year US Treasuries yield.

For example, the yield curve of the 10-year government bonds rose to 2.54% on Aug 8 from 2.49% on Aug 5.

Mrs Patricia added that it was undeniable that the government's borrowing in the future would see high cost as the cycle of low interest rates has ended.

On Aug 10, the central bank's Monetary Policy Committee (MPC) voted six to one to raise the policy rate by 0.25 percentage points from 0.50% to 0.75%, effective immediately.

The policy rate had been kept at a record low of 0.50% since May 2020.

Mrs Patricia said 82% of government bonds carry fixed interest rates and long-term bonds account for 45% of the total bond portfolio.

The ratio of long-term bonds will increase to 48% in fiscal 2023, while that of the short-term bonds is expected to decline to 14% from the current 18%.

The Thai bond market is worth 15.2 trillion baht of which 27% is corporate bonds, 6% government agencies' bonds, 17% central bank bonds and 49% government bonds.

Foreign investors hold 6.71% of the total bonds and 6.33% of the total government bonds.

Thailand's debt-to-GDP ratio as of June 2022 stood at 61.06%, which is expected to rise to 61.3% at the end of fiscal 2022 in September.

The latter figure is lower than the expectation of 62.69% due to the lower borrowing by state agencies to be their working capital.

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