July 09--New corporate bond issues are now expected to reach a record 600 billion baht this year as companies rush to take advantage of low borrowing costs before an expected rate rise in 2015, says the Thai Bond Market Association (TBMA).
Chairman Pisit Lee-artham yesterday said the fund-raising momentum through private-sector bond issues was expected to continue in the second half amid the low-interest-rate environment coupled with the economic rebound.
In the first half of this year, companies mobilised 299 billion baht worth of bonds, up from 182 billion in the same period last year, with energy, commerce and banking the top three sectors.
He said 56 companies including 10 new issuers launched bonds, up from 45 in the same period of 2013.
The TBMA earlier projected new corporate bond issues would be worth 450 billion baht this year, up from 418 billion last year.
"We expect the real sector will continue to issue corporate bonds in the second half. They'll want to mobilise funds before interest rates are raised, which is expected to happen next year," said Mr Pisit.
Yields of government short-end notes, defined as having less than one year remaining to maturity, declined by 25 basis points after the Bank of Thailand'sMonetary Policy Committee (MPC) slashed the policy rate by 0.25 percentage points to 2% at its March meeting.
Long-term bond yields declined by 25-30 basis points, tracking US Treasuries.
The yield outlook for short-term bonds depends on the policy rate, which is expected to be kept unchanged for a while longer, Mr Pisit said.
Economists forecast the MPC will leave the rate on hold for the remainder of this year.
"In the first half, the market was concerned about a potential downgrade of Thailand's credit rating due to the political turmoil, so offshore players shied away from the local bond market with net selling of 39.1 billion baht ? 4.8 billion worth of short-term bonds and 34.3 billion in long-end ones," Mr Pisit said.
"Foreign investors held 670 billion baht worth of bonds as of the end of June, down from 709 billion at the end of last December."
However, foreign fund reserves in the Thai bond market between May 26 and June 30 totalled 29.3 billion baht ? 27.2 billion of which flooded into short-term papers and the remaining 2.1 billion into long-term ones, he said, adding that this boded well for the bond market in the period ahead.
As of June 30, outstanding bonds registered with the TMBA totalled 9.22 trillion baht, up by 3% year-on-year.
Of that total, corporate bonds amounted to 2.07 trillion baht, government and Treasury bonds 3.47 trillion, state enterprise and central bank bonds 3.59 trillion and baht-denominated bonds from foreign issuers 90 billion.
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