The 10-year Thai government bond yield increased by more than 100 basis points in line with the US 10-year treasury bond yield after the Federal Reserve hiked rates by 75 basis points at its meeting last month, driving public firms to issue debt to avoid financial costs from rising interest rates.
According to data from the Thai Bond Market Association (TBMA), the value of private bond issuance rose 27% year-on-year in the first half of the year.
The value of long-term corporate bond issuance totalled 660 billion baht for the first half of 2022, up 27% from the same period last year. The value of debentures issued in all credit rating groups also increased across the board.
The average maturity increased from 4.7 years to 5.1 years. Corporate bonds with a maturity of seven years and above also saw a significant increase in the first six months of this year.
The top three industries with the highest value of corporate debenture issuance in the first half of the year were energy (24%), real estate (15%) and petrochemicals (13%).
The Thai government bond yield curve increased for all bond tenures. This is in line with the trend of rising US bond yields, spurred by the Fed's rate hikes to control inflation.
Pressure from the Thai inflation rate, which increased significantly during the second quarter, is another factor driving Thai bond yields, according to TBMA.
At the end of last month, the Thai two-year government bond yield was at 1.75% while the 10-year bond yield was 2.90%, up 110 basis points and 100 basis points respectively from the end of last year.
Five-year corporate debentures with credit ratings of AAA, AA, A, BBB+ and BBB had average interest costs of 3.09%, 3.37%, 3.61%, 4.89% and 5.35%, respectively.
For the first half of 2022, foreign inflows decreased by 5.18 billion baht. Foreign investors are holding a total of 1.03 trillion baht of Thai bonds, or 7% of the outstanding value of the Thai bond market.
The average maturity of debt securities held by foreigners is 8.4 years.
Somjin Sornpaisarn, president of TBMA, said the value of long-term debenture issuance this year is expected to exceed 1 trillion baht for the third year as more private companies will seek to issue bonds before more rate hikes are implemented.
Some debentures are due to mature in the second half of the year, providing some space in the market, he said.
Debenture issuance may hit a new record high this year if the Thai economy continues to recover, said Mr Somjin.
