Foreign investors are expected to keep steering clear of the Thai bond market in 2021 after two years of selling due to low returns, while the country’s benchmark interest rate is unlikely to fall further this year, an industry body said on Wednesday.
Other global risk assets offered quicker and higher returns, including stocks and Bitcoin, particularly given the US dollar is expected to weaken, Tada Phutthitada, president of the Thai Bond Market Association (TBMA), told a news conference.
“The spreads between Thai debt and US treasuries are also very small, so foreign funds may not flow in anymore,” he said.
Ten-year Thai bonds yielded 1.25% on Wednesday while 10-year US treasury yielded 1.12%.
Foreign investors have sold about 7 billion baht so far this year, after dumping 64 billion baht worth last year and 84.5 billion baht in 2019, association data showed.
“But not too much money may flow out as passive funds will keep investing,” Tada said, noting foreign investors still held 857 billion baht of Thai debt at the end of 2020, or 9.1% of the total outstanding.
Thailand’s policy interest rate should remain steady at a record low of 0.5% this year, as liquidity is not an issue, he said.
“Up to three-year bond yields are below the policy rate, reflecting amble liquidity,” Tada said.
The association sees new corporate bond issues of 700 billion-750 billion baht this year, after a 36% drop to 684 billion baht last year, when more firms sought other funding sources while investors shifted to deposits as Thailand saw its first coronavirus cases in early 2020.