Public Debt Management Office looks to widen fund channels
In mid-September the Public Debt Management Office (PDMO) stated it was withdrawing its offer of 15-year inflation-linked bonds, which were worth 10 billion baht in the primary market, after the yield on these bonds in the secondary market rocketed by 115 basis points in one month to 2.71 percent.
Instead, the PDMO intends to issue global bonds worth between US$1.1 to 1.5 billion over the fiscal year 2014 to help in the financing of the government’s planned infrastructure and water development projects. The director-general of the PDMO, Churarart Sutheethorn, said the timing of the bond issue will depend on when investment in the two trillion baht infrastructure and 350 billion baht water management projects commence.
The PDMO director-general said they were concerned about the rising yields on government bonds in the local markets. Also, it was considered essential to start issuing Thai government bonds overseas to broaden the funding channels on the one hand and set a reference point for local companies who might be seeking to raise funds from outside Thailand.
The PDMO met with 14 primary bond fund dealers who made it clear they believed the current rate of inflation was running higher than consumer price index (CPI) figures recently announced by the Commerce Ministry. The dealers said the rapidly growing yields on inflation-linked bonds were a sure sign the inflation rate was much higher than is being touted. Of course, the average person in the street is largely in agreement with the dealers, watching as price rises have tended to be quite high in percentage terms at the lower end of the spectrum, for example, on staples such as eggs, chicken, and rice.
Officially, the Commerce Ministry announced in August that the headline inflation rate had gone down for the eighth successive month year-on-year to 1.59 percent.
The new fiscal year began on 1 October and prior to this the PDMO stated it had plans to borrow a total of 760 billion baht. Out of this, 137 billion baht would be for infrastructure development in line with the Yingluck Shinawatra government’s plans. There would also be nine billion baht to be borrowed for the government’s planned water management projects.
The two largest PDMO borrowings will be 250 billion baht for financing the 2014 fiscal budget and 231 billion baht for refinancing maturing bonds. The PDMO will also be borrowing 130 billion baht for refinancing the Financial Institutions Development Fund’s maturing bonds.