New long-term corporate bond issuance exceeded 100 billion baht in the first two months of this year, as corporations prepare for a splurge of investment once the economy begins to recover ahead of a potential rise in interest rates.

Thai Bond Market Association (TBMA) senior vice-president Sirinart Amornthum said private companies have already raised 106 billion baht in long-term corporate bonds in the first two months of this year.

All of them are credit rating bonds rated A- or higher and are considered well received by investors.

“There is a larger amount of corporate bond issuance than expected, when compared with the same period last year, when 87.5 billion baht were issued,” she said.

Mrs Sirinart said there are a few signs the economy is on the path to recovery. Since the beginning of the year, the US 10-year bond yield increased 51 basis points, while Thailand’s increased by 52.

However, an interest rate increase may reverse the uptrend and cause inflation to rise.

Therefore, corporates will have to raise funds to prepare for new investment and expansion and lock-in low interest rates before the hike.

The TBMA predicted earlier this year that approximately 750 billion baht in corporate bonds will be issued in 2021, up from 683.5 billion baht in the previous year.

Less corporate bonds were issued last year due to the poor economy from the pandemic across sectors. Four fixed-income funds shut down with more than 400 billion baht of capital flowing out of the bond market, causing delays in issuance of some corporate bonds, especially high-yield bonds that had less interest from investors at the time, she said.

Mrs Sirinart said before the pandemic in 2019 corporates issued 1.08 trillion baht in corporate bonds.

She said investment in the bond market this year will return to normal. Despite a potential change in the interest rate, there has not been fund flows out of the country in the bond market. Foreign investors made up net sales of approximately 5 billion baht in the first two months of this year.

However, while there is no default in corporate bonds, there have been some deferrals of interest and principal payments.

The high-yield bond market has gradually recovered this year with a small amount of trading value.

High-yield bonds normally contribute to about 5% of total corporate bonds.

SOURCE: Bangkok Post