New Saving Bonds Sold Out In 10 Minutes

[george]

Saving bonds sold out in 10 minutes

BANGKOK: -- The first lot of saving bonds worth 2 billion baht with an annual interest rate of 6.4 per cent offered by the Finance Ministry for fiscal 2006 has drawn much public attention with all bonds sold out within 10 minutes of the opening for the subscription.

A source said the subscription of the bonds with a maturity of 7 years, which is scheduled on October 14-15, attracted a lot of people to queue up at every branch of Kasikornbank.

Many people came to the bank branches at dawn in a hope to be the first ones to get the bonds. At the Phaholyothin branch, some people queued up at 02.45 a.m. to wait for the opening of the bank.

Tongchai Charoensit, Executive Vice President of Kasikornbank, said the bank had begun to hand queue numbers to around 100 people waiting to buy the bonds at the Phaholyothin branch since 06.00 a.m.

Within 10 minutes after the bank staff began to key data for the bond subscription at the opening of the bank at 08.30 a.m., the bonds were totally subscribed at 500 bank branches nationwide.

He said the bonds were much interest to the people because the return rate is as high as 6.4 per cent.

He expected the next lot of the government bonds would also draw equal attention from the public.

“We reiterate our bank gives people an opportunity to buy the bonds equally. We never set aside any bonds for our clients, executives and relatives of staff. Interested persons need to queue up for the bond subscription to ensure transparency,’’ he said.

--TNA 2005-10-14

[Heng]

Of course... look at the alternatives for investment for the general public. 6.4% is a taste of the good ol' days at 9-10%!

[Khun Bob]

Saving bonds sold out in 10 minutes 

BANGKOK: -- The first lot of saving bonds worth 2 billion baht with an annual interest rate of 6.4 per cent offered by the Finance Ministry for fiscal 2006 has drawn much public attention with all bonds sold out within 10 minutes of the opening for the subscription.

A source said the subscription of the bonds with a maturity of 7 years, which is scheduled on October 14-15, attracted a lot of people to queue up at every branch of Kasikornbank.

Many people came to the bank branches at dawn in a hope to be the first ones to get the bonds. At the Phaholyothin branch, some people queued up at 02.45 a.m. to wait for the opening of the bank.

Tongchai Charoensit, Executive Vice President of Kasikornbank, said the bank had begun to hand queue numbers to around 100 people waiting to buy the bonds at the Phaholyothin branch since 06.00 a.m.

Within 10 minutes after the bank staff began to key data for the bond subscription at the opening of the bank at 08.30 a.m., the bonds were totally subscribed at 500 bank branches nationwide.

He said the bonds were much interest to the people because the return rate is as high as 6.4 per cent.

He expected the next lot of the government bonds would also draw equal attention from the public.

“We reiterate our bank gives people an opportunity to buy the bonds equally. We never set aside any bonds for our clients, executives and relatives of staff. Interested persons need to queue up for the bond subscription to ensure transparency,’’ he said.

--TNA 2005-10-14

<{POST_SNAPBACK}>

When will the next lot of bonds be for sale ?

What interest rate will they offer ?

Can non-residents buy them ?

Is there a limit on how much a person could buy ?

Say for example I buy 3 millionbahts worth, i get a good return on my money (6.4%) plus i get a visa and 1 year extension...

Edited October 15, 2005 by Khun Bob

[chownah]

This rate seems too good to be true....so I look for the catch.....could it be that the bank thinks that interest rates will skykrocket in the next few years so their trying to lock in now? or could it mean that they expect the value of the baht to drop so their borrowing baht which they'll put into another currency or invest in a foreign economy so they can pay back in cheap baht? Anyone have any ideas as to why the rate is so high?

[cclub75]

This rate seems too good to be true....so I look for the catch.....could it be that the bank thinks that interest rates will skykrocket in the next few years so their trying to lock in now? or could it mean that they expect the value of the baht to drop so their borrowing baht which they'll put into another currency or invest in a foreign economy so they can pay back in cheap baht?  Anyone have any ideas as to why the rate is so high?

<{POST_SNAPBACK}>

Maybe... both !

Or, they made a kind of too pessimistic calculation.

Inflation hit 6 % (annual in september). They wanted to be attractive to be sure to sell the lot...

But, i'd rather vote for your hypothesis....

We have to ask the question about rates in Thailand. Something is wrong. Bath is weak, we have commercial deficit, oil is a burden that is here to stay, we have a bubble in realestate... from a logical point of view, rates should increase. Quicker and harder.

But all the actors (BOT and commercial banks) move very slowly toward such an increase... They try to mimic Greenspan and his "softlanding"...

But they play a dangerous game...

[RDN]

...they expect the value of the baht to drop so their borrowing baht which they'll put into another currency or invest in a foreign economy so they can pay back in cheap baht?...

<{POST_SNAPBACK}>

Does this mean that Kasikorn is doing a "George Soros"?

[bakachan]

bond yields are going much higher over the next 7 years

Thats when these bonds mature.

you'll have plenty of opportunities to buy bonds elsewhere at these rates.

the thai ministry of finance website shows inflation rising briskly

shorting corporate bonds is a good bet now

Edited October 20, 2005 by dr_Pat_Pong

[haha]

I'm not sure, but I believe you can get bonds in the united states paying 6%. these are the ones where you invest a minimum of over a million dollars.

I know that many other countries like iceland have bonds paying 10%.

standard cds in the states are paying around 4.33% now.

so, all thailand really needs to do to get that 6% is to invest in the usa. ..just like china and many other countries are doing.

CDs in the states are backed fully by the government of the united states. right? how much safer can you get?

...makes sense for thailand to let their citizens share in the profits instead of letting the banks hog all the interest.

which is what they were doing if you think about it.

happy citizens make for a more stable country.

[Heng]

Interest rates are definitely going up. Those with big loans out are going to be feeling the pinch.

[dannishgung]

Holding a government bond of a unstable third world country for a long time is always a higher risk itself. 6.4% is higher than most fixed funds or other bonds. But I will rather buy some fixed 1 year fund from ING or Tisco or Aberdeen that are after tax 3-3.5% or so. And avoid holding a government bond issued from any third world country. There are many possible scenarios that can happen to the government here in next 7 years.

Military coup, possible assasination of prime minister or cabinet members will possibly lead to a coup or even larger scale civil war here. Southern unrest may become a national terror war and also may lead to coup or civil war. Thailand seems peaceful on the surface but there are so much problems under the surface that will break out in the future.

When there is a overthrow of a government and a new government or even a new nation is formed, do they still oblige to the old bonds issued by ex-government who was their enemy?? A very suspicious issue. Things like this have happened before in Argentina, Chile, Brasil, Spain, Paraguay ect ect.

Personally I stick to shorter term investments in all third world unstable countries. 1 year bond or mutual fund is the longest I will invest in Thailand.

Reference to the Royal family removed.

/Admin

Edited October 16, 2005 by george

[Heng]

^I doubt there were many (if any) foreigners lining up to buy those bonds. It's clearly a savings instrument meant for locals.

[chownah]

I'm not sure, but I believe you can get bonds in the united states paying 6%. these are the ones where you invest a minimum of over a million dollars.

I know that many other countries like iceland have bonds paying 10%.

standard cds in the states are paying around 4.33% now. 

so, all thailand really needs to do to get that 6% is to invest in the usa.  ..just like china and many other countries are doing.

CDs in the states are backed fully by the government of the united states.  right?  how much safer can you get?

...makes sense for thailand to let their citizens share in the profits instead of letting the banks hog all the interest.

which is what they were doing if you think about it.

happy citizens make for a more stable country.

<{POST_SNAPBACK}>

To the best of my knowledge there are no US federal gov't bonds paying that much. The 10 year treasury bond is paying about 4.5% if bought today.....that's why 6% seems so high. Can you find a link for Icelandic bonds for 10%...I'd like to find out about them....as this seems to be too good to be true also....of course there are private bonds that can pay high returns but these are usually from companies whose profiles are sort of risky.

[bakachan]

I'm not sure, but I believe you can get bonds in the united states paying 6%. these are the ones where you invest a minimum of over a million dollars.

I know that many other countries like iceland have bonds paying 10%.

standard cds in the states are paying around 4.33% now. 

so, all thailand really needs to do to get that 6% is to invest in the usa.  ..just like china and many other countries are doing.

CDs in the states are backed fully by the government of the united states.  right?  how much safer can you get?

...makes sense for thailand to let their citizens share in the profits instead of letting the banks hog all the interest.

which is what they were doing if you think about it.

happy citizens make for a more stable country.

<{POST_SNAPBACK}>

To the best of my knowledge there are no US federal gov't bonds paying that much. The 10 year treasury bond is paying about 4.5% if bought today.....that's why 6% seems so high. Can you find a link for Icelandic bonds for 10%...I'd like to find out about them....as this seems to be too good to be true also....of course there are private bonds that can pay high returns but these are usually from companies whose profiles are sort of risky.

<{POST_SNAPBACK}>

Just on the news the other day. us govt I bonds will be adjusted upwards to yield

6%

[chownah]

I have been thinking abit about this phenomenon of Thai bonds selling out instantly. It has happened before...and more than once. If a product (bonds are a product) sell too fast then wise business sense says that it is priced too low and should be raised. For bonds, raising the price means lowering the interest rate that they yield. If 6% bonds sold out in 10 minutes....then 5.9% bonds might have sold out in two days...and maybe 5.8% would have sold out in a week.....these numbers are just for illustrating the concept and I don't really know if they are reasonable or not...probably not.....but the idea is that if Thai gov't bonds are selling out like this then they are under priced...this means the interest rate is too high. I've always assumed that it was a type of corruption....the gov't lets all their rich supporters (and themselves) know about when this will happen and their applications for the overwhelming bulk of the bonds are on the bank president's desk even before the doors open for the general public who would consist of a second tier of supporters who will get preferential treatment in snapping up the leftovers. I could be wrong on this since I have no inside information....but it occurred to me this morning that it could be that the Thai gov't doesn't know how to evaluate the response to a bond offering....or, perhaps, the publicity of such popularity for Thai financial instruments could be viewed as supporting investment overall...a sort of advertising the benefits of investing in productive ways instead of buying gold which does not help finance the economy. Does anyone have thoughts on this or information to support or contradict any of my thoughts?

Edited October 22, 2005 by chownah

[brianbrain]

I have been thinking abit about this phenomenon of Thai bonds selling out instantly.  It has happened before...and more than once.  If a product (bonds are a product) sell too fast then wise business sense says that it is priced too low and should be raised. 

<{POST_SNAPBACK}>

But this is Thailand.

[The_Moog]

This is a cheap way for the Government to raise money via a Domestic Bond issue denominated in Thai Baht.

Its aimed at retail investors, and has a long 7 year fixed tenor.

If it was an institutional offering, the bond spreads would be finer but still comparable.

The fact that Bank Deposit rates are so artificially low is another issue altogether. More a feature of retail banks being stingy and 'forgetting' to pass on deposit rate rises unless you specifically request an updated rate.

[Heng]

I have been thinking abit about this phenomenon of Thai bonds selling out instantly.  It has happened before...and more than once.  If a product (bonds are a product) sell too fast then wise business sense says that it is priced too low and should be raised.  For bonds, raising the price means lowering the interest rate that they yield.  If 6% bonds sold out in 10 minutes....then 5.9% bonds might have sold out in two days...and maybe 5.8% would have sold out in a week.....these numbers are just for illustrating the concept and I don't really know if they are reasonable or not...probably not.....but the idea is that if Thai gov't bonds are selling out like this then they are under priced...this means the interest rate is too high.  I've always assumed that it was a type of corruption....the gov't lets all their rich supporters (and themselves) know about when this will happen and their applications for the overwhelming bulk of the bonds are on the bank president's desk even before the doors open for the general public who would consist of a second tier of supporters who will get preferential treatment in snapping up the leftovers.  I could be wrong on this since I have no inside information....but it occurred to me this morning that it could be that the Thai gov't doesn't know how to evaluate the response to a bond offering....or, perhaps, the publicity of such popularity for Thai financial instruments could be viewed as supporting investment overall...a sort of advertising the benefits of investing in productive ways instead of buying gold which does not help finance the economy.  Does anyone have thoughts on this or information to support or contradict any of my thoughts?

Omsin lottery "bonds" by the Government Savings Bank sell out every single time and they provide 0% interest. The part of the population that are savers sometimes don't read too much into the details as long as they are saving. It's all relative, so what if we're not beating inflation? You have the majority (in many countries, not just this one) who are not saving, financing this and that, and often in debt... hardly beating inflation either. Thus for many, as long as the principle is still there and modestly growing, that's good enough.

[KhunPadThai]

To the best of my knowledge there are no US federal gov't bonds paying that much. The 10 year treasury bond is paying about 4.5% if bought today.....that's why 6% seems so high. Can you find a link for Icelandic bonds for 10%...I'd like to find out about them....as this seems to be too good to be true also....of course there are private bonds that can pay high returns but these are usually from companies whose profiles are sort of risky.

<{POST_SNAPBACK}>

http://bonds.is

gives info for Icelandic bonds. Looks like their t-bills pay 9.75% and are Aaa rated. Now, how to buy them? Also, is the Icelandic kronur a good hedge against USD?

[haha]

I subscribe to both www.jbh.com and www.stansberryresearch.com

these are financial related websites that provide info on investments. the jbh site has a free service that provides you interest rates for fixed investments.

on a regular basis, I see offerings of 6+%. typically, you will be buying a long term bond or cd that has a callable feature. for example, the bond is for 20 years, but you can call them in after 2 years. if you need more info on it, subscribe to the free service.

as for the iceland bonds, I got that info from the stansberryresearch guys. I'm not suppose to pass their info to unpaying customers. so, if you want more info on that, you will need to go to them for the info.

I guess I could give you a little info on the iceland bonds though. just a little... a stock broker may be able to get them for you. but the key to the bonds is to get the "index-to-inflation" bonds.

check it out....

I still believe the thai government can get the interest rates easy by just buying into the us market. many countries do...

[bakachan]

thanks for the link on iclandic bonds. I sent them an email asking if

a foreigner could buy them.

also, i found the news article on us I bonds. Its kind of confusing all the rates

this article throws at the reader. I had to read it several times for it to sink in.

http://www.bankrate.com/brm/news/sav/20051019a1.asp

[KhunPadThai]

thanks for the link on iclandic bonds. I sent them an email asking if

a foreigner could buy them.

also, i found the news article on us I bonds. Its kind of confusing all the rates

this article throws at the reader. I had to read it several times for it to sink in.

US Treasury I-bonds are confusing, but a very good buy right now up until Nov. 1. If you buy during October you the expected rate for the next 12 months would be 5.9% After Nov. 1 it is expected to drop 20 bps or so. Can be bought at most US banks, but I think a US address is required.