Thailand's super-long bonds gain on tariffs, political crisis
Yields on the country's 30-year bonds fell to the lowest level since 2021, while a debt auction in the same tenor last week drew the highest demand in two years. In contrast, a 10-year bond sale held on the same day fell short of its target for the first time in over a year.
Investors are bracing for slower government spending and debt issuance if Thailand's weakened ruling coalition fails to pass a US$115 billion budget Bill by end-August. At the same time, a potential 36 per cent US tariff on Thai exports is adding pressure to an already weak economy, driving up demand for haven assets such as government debt.
The robust demand for the nation's longer maturity sovereign bonds stands in contrast to the broader retreat from such debt in several developed nations that are facing the prospect of heavy bond supply from large government spending plans.
'We remain long duration on Thai bonds given the stimulus package uncertainties, which will likely drag on growth further,' said Peerampa Janjumratsang, a portfolio manager for Asia fixed income at M&G Investments in Singapore.
She favours longer-dated Thai sovereign bonds, citing rich valuations for tenors of up to around 10 years.
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Japanese 30-year yields are near record highs as political uncertainty fuels expectations for fresh spending, while similar tenor yields in the UK surged this month on speculation on the ouster of UK Chancellor of the Exchequer Rachel Reeves. US 30-year yields have come under renewed pressure on concerns over President Donald Trump's proposed US$3.4 trillion fiscal package.
Meanwhile, Thai bonds are likely to get continued support from the central bank, which wants monetary policy to stay accommodative. The Bank of Thailand's policy rate stands at 1.75 per cent, with the next interest-rate review scheduled in August.
Thailand's longer-maturity bond yields could fall by another 10 to 20 basis points if average tariffs on Thai goods exceed 20 per cent and a political stalemate delays government spending, prompting Bank of Thailand rate cuts to as low as 1 per cent, said Poon Panichpibool, a strategist at Krung Thai Bank.
'Thai 20 and 30-year government bonds offer attractive value to investors keen on extending duration.' BLOOMBERG
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