Thai 10-year yield at one-month high


Thailand's government bonds fell, pushing the 10-year yield to a one-month high, on speculation slowing growth and a rice-buying program will put a strain on the nation’s finances. The baht was steady.

Manufacturing production declined 3.5% in June from a year earlier, while exports fell 3.4%, according to official data released July 26. Both figures trailed median estimates in Bloomberg surveys. A potential increase in losses from the government's rice purchases could jeopardize the goal of balancing the budget by 2017, Moody's Investors Service said this month.

"Thailand's stretched fiscal position is in the spotlight," said Vishnu Varathan, a Singapore-based economist at Mizuho Bank Ltd. "There is a focus on the strain from the rice-buying program."

The yield on the 3.625% sovereign bonds due June 2023 rose one basis point to 3.88% as of 8.46am in Bangkok, according to data compiled by Bloomberg. This is the eighth day in a row the yield has increased, rising 19 basis points over the period to the highest level since June 26.

The prospect of more losses from the rice-purchase program are credit negative, Steffen Dyck, assistant vice president at Moody's in Singapore, said in a July 17 interview. Thailand, once the world's top exporter of the commodity, has spent 588.7 billion baht (US$19 billion) stockpiling 27 million tonnes of milled rice since Oct 2011 under a policy that paid farmers as much as 50% more than local prices.

The Southeast Asian country will record a current-account deficit of $720 million in June, which would be the third consecutive monthly shortfall, according to the median estimate in a Bloomberg survey before data due July 31.

The Thai currency was little changed at 31.15 baht per dollar, data compiled by Bloomberg show. The currency has fallen 0.7% in three days. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose four basis points, or 0.04 percentage point, to 6.07%.