The Thai Bond Market Association (ThaiBMA) expects the value of corporate bonds to hit a new record high of 3 trillion baht this year as borrowers want to lock in costs amid rising interest rates and the economic recovery.
Long-term corporate bond issuance reached 997.06 billion baht in value in the first nine months, an increase of 22% from the same period last year, or 96% of the total issued value of the previous year, the association said yesterday.
"Interest rates are rising, so people are locking up costs because the longer they wait, the higher the costs," said senior vice-president Ariya Tiranaprakij.
"Companies have issued at least 50 billion baht and there will be more from rollover in the last quarter so this year we should reach at least 1.3 trillion," she added.
The top five businesses with the most corporate bonds were energy at 23%, followed by 14% in property, 13% each in petrochemical and finance 13%, and the rest 9%. About 90% of corporate bonds were investment credit rating bonds with the remainder high-yield bonds.
The continued policy rate hikes of the Federal Reserve (Fed) and high inflation pressured the Monetary Policy Committee (MPC) to raise the policy rate in August and September.
As a result, the yield of government bonds and that of corporate bonds continued to move up during the third quarter.
However, the value of corporate bonds in the first nine months was as high as the whole amount of 2021.
"It reflects the acceleration in corporate issuer funding to lock in borrowing costs and signs of economic recovery," Ms Ariya said.
Government bond yield curve increased in the third quarter as the Fed continued to lift the US rate as did the MPC. The two-year and 10-year government bond yields rose 123 basis points and 132 basis points from the end of 2021, respectively, to 1.88% and 3.21% at the end of last month.
Corporate bond yield curve for five-year maturity of all rated bonds rose in the quarter as a result of an increase in government bond yields and credit spreads, resulting in higher costs of bond issuance which increased by an average of 32 basis points from the end of the second quarter.
In the third quarter, five-year debentures with AAA rating bear average interest cost of 3.35%, 3.68% for AA, 3.89% for A, 5.03% for BBB+ and 5.98% for BBB.
ThaiBMA president Somjin Sornpaisarn said foreign investors continued to net sell Thai bonds in July after the Fed raised its policy rate by 0.75% for the second time in a row, before returning to buy a small amount in August. But it became clear in September that the Fed would continue to lift the rate aggressively.
Thai bonds were sold since mid-September, resulting in net selling of 32.5 billion baht, with their holdings of Thai debt bond equal to 989 billion baht, down slightly from the end of last year and accounted for 6.3% of the outstanding value of the Thai bond market.