Corporate Bond Yields Rise by 94 Basis Points
Thai corporate bond yields have climbed significantly, raising financing costs for businesses despite low policy rates.
Corporate bond yields in Thailand rose by 94 basis points this year. The average five-year yield increased from 1.77 percent to a higher level by September. This trend has increased funding costs for business operators across the country.
The Bank of Thailand maintains a policy rate of 1 percent. This is the second-lowest rate among major central banks globally. However, rising yields indicate that external factors are driving up private financing costs.
Yields Rise Amid Global Trends
Bond yields cover ratings from BBB to AAA have all increased. The US Federal Reserve and the Bank of Japan are keeping their policy rates low. Yet, the rise in Thai corporate bond yields persists.
Kasikornbank’s Research Center notes that external drivers are the primary cause. This occurs even though the Bank of Thailand expects to hold rates steady. The bank anticipates the 1 percent rate will remain through the first quarter of 2026.
Investment Volumes Show Contradictory Signals
Total bond investment volumes increased by 11.9 percent year-on-year. This growth reached 7 trillion baht by August. However, total retail deposits grew only 0.5 percent during the same period.
Individual fixed depositors reduced their holdings by 1.9 percent. The number of bond investors rose from 358,000 to 346,000. This shift suggests a move away from traditional savings products.
Small Firms Face Higher Costs
Young Thawornchai, chief economist at SCB CIO, highlights structural problems for non-supported businesses. Low policy rates have not solved these issues for small firms. Many small businesses have an average coverage ratio of less than one.
According to the Monetary Policy Committee, maintaining low rates carries risks. These include asset price bubbles and financial system instability. The committee concluded that keeping rates at 1 percent is the appropriate balance.
