Thread: Bond auctions fail as coup hits demand

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

Can Farang buy Thai Bonds? Can they be bought from outside Thailand? cheers

Was anyone surprised that investors are avoiding Thailand's debt offerings?

They were doing so for the past six months. It's all down to rates. Make it more attractive reflecting the risk and they will come. Simple really. The problem the Thai have is reconciling themselves that the strong baht of Jan/Feb 2013 is no longer the case and the structural weaknesses of their economy, masked by QE, need addressing.

Y should have printed a few Billion new Baht notes to pay the farmers and then left the military to deal with the inflation that followed.

Originally Posted by Breny

Can Farang buy Thai Bonds? Can they be bought from outside Thailand? cheers

The answer was provided;
Foreign funds own 16.4% of Thai sovereign debt

Typically, foreign debt is purchased by large investment funds. A look at any of the big mutual funds shows that they have foreign investments and the Thai debt can be included.