Steep yield curve makes Thai bonds investor darlings
SINGAPORE (REUTERS) - Investors, both non-resident and domestic, are rushing into Thai government bonds, betting that the combination of a steep yield curve and a dovish central bank will lead to an outperformance of this market over other Asian bond markets.
Foreign investors have pumped a net US$3.1 billion (S$3.9 billion) into Thai government bonds in the past month, driving yields down far more than in markets such as Malaysia, Philippines or even South Korea, whose central bank is also more likely to cut rates than raise them in the near future.
"It is everybody's darling, in a sense, because the bond curve and swap curve are quite steep," said Mr Claudio Piron, currency and rates strategist at BofA Merrill Lynch in Singapore.
"The curve is implying the Bank of Thailand will hike by 25 basis points in a year's time, the carry and slide looks very attractive and policy looks quite tight," he said.