Thailand’s auction of 30-year bonds on Wednesday experienced the weakest demand in at least six years amid concerns over a potential sovereign rating downgrade and uncertainty about future interest rate movements.
The auction for bonds maturing in June 2055 saw a bid-to-cover ratio of just 0.68, the lowest for the 30-year tenor since at least 2019. In comparison, the sale of 2029 bonds on the same day had a bid-to-cover ratio of 1.39.
Demand for the 2055 bonds was weak as investors grow increasingly worried about a possible downgrade of Thailand’s credit rating next year, explained Kobsidthi Silpachai, head of capital market research at Kasikornbank in Bangkok. Additionally, there is divided market opinion regarding whether the Bank of Thailand will cut rates in December.
Currently, Moody’s rates Thailand at Baa1 with a negative outlook, marking no downgrade since the Asian financial crisis in 1997. Fitch rates Thailand at BBB+ with a negative outlook—three steps above junk status. S&P Global confirmed Thailand’s BBB+ rating with a stable outlook as of November 13.
Baht swaps indicate around 36 basis points of easing over the next six months, down from up to 50 basis points in early October.
Poon Panichpibool, a strategist at Krung Thai Bank in Bangkok, suggested that some investors might have already bid for ultra-long-term bonds during the November 5 auction of 20-year bonds, contributing to weaker demand for the 30-year bonds. Other factors include seasonally weak demand towards year-end and a lack of conviction about imminent rate cuts by the Bank of Thailand.