Thailand's five-year bonds halted a seven-week run of gains and the baht declined after the Federal Reserve ended its bond-buying programme, damping demand for emerging-market assets.
The Federal Open Market Committee (FOMC) said in a statement this week that signs of improvement in the labour market meant it could end its record stimulus, while signalling the central bank is on course to raise interest rates next year. The Bank of Thailand reports last month's export numbers on Friday, after overseas shipments posted the sharpest contraction in August since November 2011. The Finance Ministry cut its 2014 growth forecast on Thursday.
"The hawkish tone from the FOMC was a catalyst to take profits," said Vivek Rajpal, a Singapore-based rates strategist at Nomura Holdings Inc. "This is a minor technical correction. Thailand's growth and inflation dynamics would remain favorable to the rates."
The yield on the 3.875% government notes due in June 2019 rose seven basis points, or 0.07 percentage point, to 2.7% from Oct 24 as of 10.31am, according to data compiled by Bloomberg. That was the biggest increase since May 30. The yield fell three basis points on Friday.
The ministry lowered its growth projection to 1.2-1.7% from 2%.
The baht weakened 0.2% in the past five days and for this month to 32.502 per dollar in Bangkok, according to data compiled by Bloomberg. The currency advanced 0.2% on Friday. One-month implied volatility, a measure of expected exchange-rate swings used to price options, was little changed from a week ago and rose 12 basis points on Friday to 4.9%.
One-year interest-rate swaps fell two basis points this week to 1.9%, below the central bank's benchmark 2% policy rate. The contracts reached 1.85% on Oct 16, the lowest level since June, data compiled by Bloomberg show.