Finance Ministry to Launch New Bonds

The Finance Ministry has announced the sales of government bonds with variable interest rate for the first time in Thailand's history this month.

The bonds are expected to attract a wide array of investors wanting to beat high inflation.

Public Debt Management Office, or PDMO, Director General Chakrit Parapunthakul stated that the Finance Ministry is prepared to hold sales of government bonds with variable interest rate for the first time in Thailand worth no more than 40 billion baht from July 11 to 13.

The minimum investment for the ten-year bonds will be 100,000 baht and the returns and benefits are divided into three parts.

The first is the coupon rate which is currently at one percent per year.

Details on the rate will be announced next Monday.

Secondly, the returns will be calculated based on inflation and thirdly the returns will be deducted from the inflation figure based on the bond funds.

The returns will be announced two weeks prior to the payment which will be paid every six months.

Chakrit believes that this type of bonds will attract investors as it is a mean to help beat high inflation which has caused public spending power to dip.

The bonds sales will help reduce the risk since the government is prepared to pay the inflation deduction.

The PDMO director general pointed out that if inflation exceeds three percent, investors' final real returns will be higher than those from bonds in the market with the current ten-year bond investment rate at 3.8 percent which will be available for institutional investors and individuals.

The PDMO has prepared to stage international roadshows to assess investors' interest in the bonds and is confident in investor confidence since the PDMO will be responsible for launching the bonds, distributing through four commercial banks, namely HSBC, Krung Thai Bank, Siam Commercial Bank and Kasikorn Bank.

The majority of the countries that have sold these bonds are predominantly developed countries, such as the United States, England, France and Japan.

-- Tan Network 2011-06-06

The attraction of index-linked savings products issued by the UK Government is that returns are tax-free (top rates of taxes in the UK are 50%). No mention in this article about taxation. I'll reserve judgement on their attractiveness until further details emerge, but it's certainly one worth watching.