The yields in the Thai bond market tend to gradually rise in 2021, especially medium term to under 10-year government bonds, due to two major factors: 1) the possibility of rising US treasury bond yields if the US is able to control the outbreak of COVID-19 and the approval of President Joe Biden’s economic stimulus packages of up to USD1.9 trillion, and 2) the projection that the Thai government may issue more bonds compared with the preceding year.
The Thai government needs to raise funds to finance its measures and projects in order to sustain Thailand's economic recovery, continuing from the preceding year, to compensate for the budget deficit and borrowing for various economic recovery projects that may need funds higher than THB1 trillion. In addition, businesses that need to manage financial costs may raise funds through the bond market and/or issue new bonds to replace matured bonds. It is expected that the value of long-term private bonds that are due in 2021 will reach THB720 billion.
Although the public and private sectors plan to raise funds with a combined amount of not less than THB2 trillion, KResearch assesses that the high level of liquidity in the system will be sufficient in supporting the fund-raising needs. However, an important factor that warrants attention is the rising fund raising cost for bonds with a maturity of more than 1 year for both public and private sectors, despite Thai policy rates tending to stabilize at a steady level throughout 2021.
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