Thai Government's Bond Plans Trigger Yield Fluctuation.

Byline: Wichit Sirithaveeporn

Jul. 28--Government bond yields in the secondary market continue to fluctuate on trader concerns about plans by state agencies to issue bonds worth hundreds of billions of baht in the next few months.

The Bank of Thailand last week announced that some 774 billion baht in bonds would be issued over the next three years to finance liabilities of the Financial Institutions Development Fund. Maturities would range from six to 20 years.

Some 320 billion baht in bonds would be issued in the fourth quarter of this year alone, according to M.R. Pridiyathorn Devakula, central bank governor, while 454 billion would be issued from fiscal 2003 to 2005.

With excess liquidity in the money markets, the new bond issues could be structured without any negative impact on interest rates, he said last week.

But investors say that given current market uncertainties, a huge new bond issue would almost certainly have to offer pricing incentives to draw buyers, thus potentially pushing up interest rates across the yield curve.

Other bond issues coming into the market over the next few months include new financing deals by state enterprises. The government itself will have to issue debt for fiscal 2002 starting in October to cover the projected 200 billion baht budget deficit.