Thai central bank cuts bond supply again in August as baht stays strong

By Satawasin Staporncharnchai

 

FILE PHOTO: The Bank of Thailand logo is seen in Bangkok, Thailand April 26, 2016. REUTERS/Jorge Silva

 

BANGKOK (Reuters) - Thailand's central bank has cut the amount of short-term bonds it will sell via auction in August to help slow fund inflows amid a strong baht <THB=TH>, while traders said yields continue to fall on expectations of an interest rate cut.

 

The supply of three-and six-month bonds was cut by a combined 20 billion baht ($649 million) in August, compared with July's amount, the Bank of Thailand (BOT) said in a statement on Friday.

 

That follows July's supply reduction of such bonds by a combined 50 billion baht, compared with June.

 

Earlier this month, the central bank also issued measures against speculative fund inflows and was ready to use additional tools if needed.

 

Cutting bond supply is among the measures, according to BOT Governor Veerathai Santiprabhob.

 

The baht has gained about 5.6% against this year, becoming the best performing currency in Asia, driven by fund inflows.

 

"The BOT's measures haven't made the baht weaken as fast as they expected," said Kris Na Songkhla, executive vice president of Krungthai Asset Management.

 

"That's because other countries cut rates, so foreign funds are flowing into countries that don't".

 

The BOT left its benchmark interest rate <THB=TH> unchanged at 1.75% in June, for a fourth straight meeting, after raising it in December for the first time since 2011. It will next review policy on Aug. 7.

 

However, foreign investors have sold a net 22 billion baht of bonds since the central bank's measures.

 

At Tuesday's auction, yields eased, reflecting expectations of a rate cut, possibly late this year, traders said.

 

The accepted yield of 182-day bonds dropped to 1.74913% from 1.74938% at the previous auction, while the yield on 91-day bonds eased to 1.74982% from 1.75127%.

 

(Writing by Orathai Sriring; Editing by Jacqueline Wong)

 

-- © Copyright Reuters 2019-07-31

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15 minutes ago, webfact said:

"The BOT's measures haven't made the baht weaken as fast as they expected," said Kris Na Songkhla, executive vice president of Krungthai Asset Management.

Hasn't weakened as fast as expected ? Not sure how this person claims a salary - it hasn't weakened at all !

As an observation I checked the Vietnamese Dong and Malaysian Ringgit today and they seem to have been falling against the USD and doing the total opposite to the Thai baht..

 

If I didn't have ties here in Thailand, as an expat Vietnam would look very attractive right now.

 

 

 

It's been and still is a win win for Baht investors over many years. There's really no downside the funds just keep on locking in past profits and keep buying in even though the yield curve starts to level out a bit.

IMO it's going to take more than cutting interest rates to knock the Baht off its pedestal

And don't just think its a bubble that will burst either. Half the time they just slowly deflate in an orderly fashion as funds find better returns else where. 

Someone profits from a high Baht.  Otherwise we wouldn’t have this debacle. More ChiCom subs?  Thailand 4.0 (aka ChiComs Belt & Road Initiative? Lined pockets at Bank of Thailand?  This activity has gone on for several years. Whoever’s doing it, for whatever reason—will destroy exports and tourism...

1 hour ago, Isaan sailor said:

Someone profits from a high Baht.  Otherwise we wouldn’t have this debacle. More ChiCom subs?  Thailand 4.0 (aka ChiComs Belt & Road Initiative? Lined pockets at Bank of Thailand?  This activity has gone on for several years. Whoever’s doing it, for whatever reason—will destroy exports and tourism...

does it feel better when parotting barstool drivel conspiracies without taking into account economic realities?

16 minutes ago, Naam said:

does it feel better when parotting barstool drivel conspiracies without taking into account economic realities?

they have no idea. will always blame "the elite" or "the rich" when something doesn't go their way.

 

the scary thing is that these people are entitled to vote.

Apparently It’s because of the great golf courses.  That’s the reason an economist friend of mine gave.  Hence all the investment. He wasn’t joking either. Not sure how many non Sino-Thais play golf though....

The problem is, that the private level of debt in Thailand is very high. If the interest rates become lower this level will rise. So the situation for the BoT is not easy.