Bank of Thailand confident in limited corporate bond rollover risk

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Despite rising interest rates, the Bank of Thailand has expressed confidence in the limited risk of corporate bond rollover this year, stating that it should not pose a significant threat to systemic risk. The local bond market has remained functional, with private businesses continuing to secure new funds.

 

Sakkapop Panyanukul, the senior director for financial markets at the central bank, acknowledged the presence of rollover risks. However, he attributed these to specific internal factors unique to each company. He pointed out that corporate bonds have exhibited positive growth over the past three years, demonstrating the capacity of local businesses to secure new funding.

 

In anticipation of increased financial costs from interest rate hikes, numerous private businesses have preemptively secured low costs through bond offerings. The Bank of Thailand’s data indicates a 9% year-on-year growth in corporate bonds outstanding in 2023.

 

Despite a 2% drop in 2020 due to the pandemic, growth in bonds outstanding reached 19% in 2022 and 11% in 2021. The proportion of undersubscribed bonds remained minimal in comparison to total corporate bond issuance over the last two years.

 

Sakkapop highlighted that the undersubscribed corporate bonds were primarily high-yield bonds provided by companies facing specific issues. The undersubscribed investment-grade bonds were offered by only two to three companies, again due to issuer-specific factors.

 

By Alex Morgan

Caption: PHOTO: via Thailand Business News

 

Full story: The Thaiger 2024-01-19

 

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