Bangkok Post, Thailand, Money Matters Column.

Byline: Ayudhya JF Asset Management

Aug. 1--This week we will look again at the fixed-income teams competing in the AJF Young Fund Manager Award contest. Interestingly, new teams have managed to emerge on top in this week's ranking.

A closer review of their portfolios shows that most have a very large portion of cash. This could be a result of their strategies to reduce market risks stemming from the planned issue of Financial Institution Development Fund bonds.

The government announced last week that it would let the FIDF issue about 320-billion-baht-worth of new medium- to long-term bonds this year. This enormous supply inevitably affects the current issues and the market yield, particularly on the bonds with longer terms.

After the announcement, the yields of long-dated government bonds (maturing in 2008 or later) were trading about 0.10-0.15 percent higher. Therefore, portfolios that invest in these bonds would see the bond prices drop and incur negative returns for the period.

Corporate bonds, particularly the most actively traded ones such as AIS and TAC, have had a similar outcome. The yield for the TAC05O bond shot up by 0.60 percent in the past two weeks.

A review of the teams that are ...