(Nov 26): Thailand’s sale of 30-year bonds drew the weakest demand in at least six years amid concern over a potential sovereign rating downgrade and uncertainty over the outlook for interest rates.
The nation’s auction of debt due in June 2055 drew a bid-to-cover ratio of 0.68, the lowest for the 30-year maturity since at least 2019. A sale of 2029 bonds on the same day saw a bid-cover ratio of 1.39.
Demand for the 2055 auction was weak as investors are increasingly spooked over a potential downgrade to Thailand’s credit rating next year, said Kobsidthi Silpachai, head of capital market research at Kasikornbank pcl in Bangkok. Investors are also at odds on whether the Bank of Thailand will cut rates in December, he said.
Moody’s Ratings currently ranks Thailand at Baa1 with a negative outlook. It hasn’t downgraded the Southeast Asian nation since the Asian financial crisis in 1997. Fitch Ratings puts the country at BBB+ with a negative outlook, three levels above junk. S&P Global Ratings affirmed its rating for Thailand at BBB+ with a stable outlook on Nov 13.
Baht swaps are currently pricing in around 36 basis points of easing over the next six months, compared with as much as 50 basis points in early October.
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“Demand could have been weak at the 30-year auction as some investors could have already bid for the ultra-long-term allocations at the 20-year auction on Nov 5,” said Poon Panichpibool, a strategist at Krung Thai Bank pcl in Bangkok. Among other reasons for the poor result are “seasonally weak demand towards the year-end and a lack of conviction over more near-term BOT rate cuts”, he said.
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