The bond trading this week totalled Baht 36,901 million, all of which were outright transactions. The daily average rose 2.0 per cent to Baht 7,380 million from Baht 7,235 million last week. Government bonds accounted for 59.9 per cent of the total, with the three most heavily traded issues being LB06DA (18.2 per cent) LB08DA (9.4 per cent) and LB046A (6.8 per cent). Treasury bills accounted for 22.5 per cent or Baht 8,319 million, state enterprise bonds 8.2 per cent or Baht 3,009 million, and FIDF bonds 5.4 per cent or Baht 1,975 million.

 

The bond market this week was very active and yields highly volatile. At the beginning of the week, investors bought both short-term and medium-term bonds as they expected that interest rates would decline in line with those of the US. However, the Bank of Thailand insisted that the benchmark 14-day R/P rate would not be changed. After the government announced the plan to issue bonds worth Baht 220,400 million to finance the budget deficit, yields rose immediately. By the end of the week, there was still buying force for government and state enterprise bonds with a term not more than 5 years.

 

Overall, yields on bonds with 1 year to maturity declined 18 bps, those on bonds with 2-5 years to maturity dropped 29-39 bps, those on bonds with 7 years to maturity fell 25 bps and those on bonds with over 10 years to maturity decreased 11-15 bps. Comparing yields on bonds with 2, 5 and 8 years to maturity, it was apparent that medium-term bonds were more attractive. The yields on bonds with 2 years to maturity were expected to remain at this level while the demand for bonds with 8 years to maturity was very limited as investors were waiting for the bidding next month. The spread of the 5 and 8 years bonds was at 90 bps and was tending upward.

 

Trading volume of FIDF bonds was considerable as investors were interested in short term bonds. Yields dropped sharply with the premium for FIDF031A and FIDF034A being at 2-8 bps and FIDF061A and FIDF064A at 27-35 bps.

 

Trading volume of corporate debentures was thin with premium rising sharply due to a drastic drop in the yields on government bonds. Trading volume amounted to Baht 1,479 million, accounting for 4.0 per cent of the total. The three most active issues were TAC064A, IFCT048A and AIS063A.