Thai bond yields have not increased significantly, although capital movements have become more volatile, says Theeraj Athanavanich, a bond market adviser to the Public Debt Management Office (PDMO).
Fundraising costs in the domestic market remain attractive, given high financially liquidity, he said. PDMO's borrowing management has become more difficult, said Mr Theeraj.
PDMO has closely monitored capital flows, particularly amid wild swings triggered by the monetary policy of advanced economies.
He said new borrowings would carry higher interest costs, while existing debts -- most of which are long-term debt -- have fixed interest rates.
The government's debt is able to cushion volatile capital flows because PDMO has used bond switching, an option that allows bond issuers to convert bonds to other series, as an instrument to prevent risks.
Capital flow fluctuations sometimes weaken demand in Thai government bonds, as seen by the bid coverage ratio of 1 for some bond series, compared with 2-4 normally, he said.
Capital flows during the first two months of this year, for instance, saw the bid coverage ratio of some bond series hit 4.4 in January, when capital inflows flooded the Thai bond market.
But the ratio fell to 1.5 in some bond series this month when capital flows slowed, said Mr Theeraj.
Demand for bonds remains intact because of high liquidity in the domestic financial market, he said.
Bid coverage ratio measures demand for a particular security during auctions.
A higher bid coverage ratio indicates stronger demand.
In the meantime, Sorapol Tulayasatien, director of the Bureau of Macroeconomic Policy under the Fiscal Policy Office, said offshore funds worth tens of billions of dollars were cashed out from Thai bonds and the equity markets in recent weeks.
Yet the baht continues to appreciate against the US dollar as funds still flow into the country through direct investment and tourism income.
The baht is the third-best gainer among Asian currencies this year at 3.3%, trailing the Japanese yen (4.6%) and the Malaysian ringgit (3.5%).