Thai Fixed Income Market 22-26 Feb 2016

Since the beginning of this year, government bond yields have been experiencing a gradual decline. Short-term bonds of under one year have been reduced by 5-10 bps., bonds between 1-10 years cut down by 9-48 bps. As for bonds with an upwards of 10 years of age have been taken down by 20-45 bps. This has been due to a mixture of both internal and external factors such as China's volatile economy, reduced oil prices along with the differing monetary policies of major industrialized countries - causing capital to be moved back and forth between countries and shifting in exchange rates.

After the Bank of Japan implemented its negative interest rate policy along with the prediction of European banks to further relax monetary policies, investors had to increase holding of assets for markets of emerging countries such as Thailand. They also expect low inflation rates coinciding with the drop in oil prices.

At the first annual meeting on February 3rd, The Monetary Policy Committee (MPC) reached a unanimous decision to establish interest rates at 1.5% per year. This year's economic forecast predicts growth, the ever-increasing demand being the main reason behind it. Despite this, there are increasing external factors such as the commodity prices remaining low and the revival of major economic partners along with a shift in the infrastructure of global trade.

Comparing yield upon investment of government date 30/12/15

Bps changes as of / Term 1-Mth 3-Mth 6-Mth 1Y 3Y 5Y 7Y 10Y 15Y 20Y
29-JAN-16 -0.10 -0.09 -0.05 -0.04 -0.17 -0.24 -0.26 -0.15 -0.13 -0.21
29-FEB-16 0.00 0.00 -0.01 -0.01 -0.04 -0.17 -0.20 -0.23 -0.24 -0.19
YTD -0.10 -0.09 -0.06 -0.05 -0.21 -0.41 -0.46 -0.38 -0.38 -0.40
Yield Curve at 29/02/2016 1.40 1.41 1.44 1.44 1.52 1.74 1.91 2.13 2.57 2.77

Returns on government bond investments since the beginning of the year as recorded from the Government Bond Total Return Index as of February 29th, 2016 is at 3.16%. Whereas the returns on investments in the private debt sector is recorded by the Corporate Bond Total Return Index at 1.26%.

As for future bond market investment trends, external factors are still expected to contribute towards market volatility, especially when current government bond yield curve is low and show signs of being less than average, pushing profits acquired by institutional investors.