21. 56 % Pa Interest On Your Baht !

[topfield]

Don't believe ??

See below and check yourself article today from The Nation.

Can anyone of your readers explain how to benefit from these high rates ?

Where are they quoted/available ? New York ? London ? Singapore ?

Also : is Bloomberg, Yahoo Finance and others quoting the onshore or the offshore rate ??

" The baht's implied interest rate, which is calculated from the swap price, reflects the higher demand with baht liquidity in offshore markets. The tomorrow-next rate, also known as the overnight rate, increased to 21.56 per cent yesterday morning, from 15.38 per cent on Wednesday. The one-day rate rose to 26.93 per cent yesterday morning, compared to 19.79 per cent on Wednesday "

[Naam]

topfield,

i am not at all inclined to write a dissertation on IMPLIED and swap rates. all what i am doing is to point out that nowhere in this report "% p.a." is mentioned (as you posted in the heading of this thread). of course... all of us would like to enjoy these rates.

for the record: offshore overnight rates for THB are today 4.76% p.a. for amounts of THB 5mm and above.

source: my bank in Singapore where i keep some THB cash.

Edited December 29, 2006 by Dr. Naam

[samtam]

The overnight rate you refer to will cover "overnight" from today till the market reopens on Wednesday, in other words divide it by 4.

[Meerkat]

The rates are annualised, so p.a. is correct. Also correct is that these are very short-term interbank rates, so out of the reach for the likes of you and me. The article is incorrect in stating that the tomorrow-next rate is called overnight. The "overnight" rate is the rate from today until tomorrow (subject to modified-following business-day convention as samtam implied. Tomorrow-next is called...no surprises..."tom-next".

Finally, as the good Doc has pointed out, the rates quoted in the Nation are implied rather than tradable - in theory you could generate the rates by doing the necessary forward FX trades.

I'll not waste time going into the calculations used in working out interest or forward rates, suffice to say that forward FX rates are simply a function of the interest rate differential between two currencies. Plenty more on the subject on the web, I'd assume.

To put the rate in perspective, 1 million baht invested overnight for one day at 26% would generate about 3500 baht (assuming interest is paid on an ACT/365 basis for THB - I couldn't be bothered to check). Hardly worth writing home about.

I remember during the Asian financial crisis, we were trading overnight HKD at rates of over 500%. IIRC, other currencies in the region were trading at over 1000%.

[topfield]

The rates are annualised, so p.a. is correct. Also correct is that these are very short-term interbank rates, so out of the reach for the likes of you and me. The article is incorrect in stating that the tomorrow-next rate is called overnight. The "overnight" rate is the rate from today until tomorrow (subject to modified-following business-day convention as samtam implied. Tomorrow-next is called...no surprises..."tom-next".

Finally, as the good Doc has pointed out, the rates quoted in the Nation are implied rather than tradable - in theory you could generate the rates by doing the necessary forward FX trades.

I'll not waste time going into the calculations used in working out interest or forward rates, suffice to say that forward FX rates are simply a function of the interest rate differential between two currencies. Plenty more on the subject on the web, I'd assume.

To put the rate in perspective, 1 million baht invested overnight for one day at 26% would generate about 3500 baht (assuming interest is paid on an ACT/365 basis for THB - I couldn't be bothered to check). Hardly worth writing home about.

I remember during the Asian financial crisis, we were trading overnight HKD at rates of over 500%. IIRC, other currencies in the region were trading at over 1000%.

Thank you for all that interesting info. During the '97 crisis there were rates in Singpore for baht of over one thousand percent.for overnight money. One month baht deposits were at around 24 percent . Its quite likely that higher than normal one month rates are now available in Singapore. The only question is how to avail oneself of these higher rates. If only 10 percent pa its worth considering transfering ones baht to Singapore...if allowed to do so.