Bond auctions fail as coup hits demand
26/05/2014
Thailand’s two debt auctions since the military took power in a May 22 coup have both raised less than targeted amid cooling demand for the nation’s assets.
The finance ministry sold 18.157 billion baht ($557 million) of 28-day bills on Monday, less than the 20-billion-baht target, the central bank reported.
The bid-to-cover ratio was 0.91, marking the first time in six months a sale of that tenor has failed to attract orders for all of the debt offered. The Bank of Thailand sold 28.18 billion baht of 14-day notes on May 23, short of its 30-billion-baht goal.
Today’s failed auction may be “a bit of a worry if you see it from a flows perspective,” said Wee-Khoon Chong, Singapore-based head of Asian rates strategy at Nomura Holdings Plc. “Foreigners exiting from markets heighten market volatility. One failed auction does not form a trend and more scrutiny will be needed of auctions from now.”
Waning demand for the nation’s debt may push up borrowing costs in an economy that shrank 0.6% in the first quarter from the prior three months.
Global funds sold $208 million more of Thai bonds than they bought on May 23, the first day of trading following the coup, according to Thai Bond Market Association data. They also pulled $208.3 million from the nation’s shares that day, boosting last week’s net sales to $600 million.
The baht weakened 0.1% today to 32.595 per dollar as of 4.28pm in Bangkok, while the yield on one-month government debt was unchanged at 2.01%.
Coup leader Prayuth Chan-Ocha was officially endorsed as the nation’s leader by royal command at a ceremony today in Bangkok, having seized power last week to end six months of political instability and protests that hurt the economy. He said a night-time curfew will remain in force and his junta will enact political reforms, without detailing any changes or providing a timeline for when new elections may be held.
Foreign funds own 16.4% of Thai sovereign debt, compared with 34.6% in Indonesia, 28.6% in Malaysia and 18.3% for the Philippines, according to a May 12 report from BNP Paribas SA.
bangkokpost.com