Interest Rate Expectation Index for June 2021
The Index reflects market’s expectation that Bank of Thailand’s Monetary Policy Committee (MPC) will keep its policy rate unchanged at 0.5% at its meeting in June. Yields of 5-year and 10-year government bonds at the end of the second quarter are expected to be little change from the date that this survey was conducted (21 May 2021). More number of respondents anticipated that yields of 5-year and 10-year government bonds may not move away from the current level although worries over the U.S. inflation may trigger the U.S. Treasury yields to rise. An executive decree allowing the government to borrow up to THB500 billion may put pressure on the government bond yields to rise but it was offset by the fact that Thailand remains at risk of having COVID-19 spread. On the contrary, the uncertainty of COVID-19 vaccine distribution may lower the yields down instead.
Ariya Tiranaprakij, Deputy Managing Director of the Thai Bond Market Association, revealed highlights from Interest Rate Expectation Index for June 2021 as follows;
- The Interest Rate Expectation Index for June on MPC’s policy rate remains unchanged at 47 from the previous survey and remains in “Unchanged” zone. It reads that the MPC is expected to keep its policy rate steady at 0.5% at its meeting in June as the third wave of COVID-19 spread resulted the economy to be recovered slower than earlier anticipated. In addition, the Bank of Thailand has put in place financial rehabilitation measures to support business recovery, including SMEs. Therefore, the necessity to cut its policy rate further is diminished.
The Interest Rate Expectation Index on yields of 5-year and 10-year government bonds at the end of the second quarter moves down to “Unchanged” zone. The index read is lowered from the previous survey as a greater number of respondents expected to see steady yields. This reflects that the yields of 5-year and 10-year government bonds at the end of the second quarter are unlikely to be different from the date that the survey was conducted, where they are expected at 1.06% and 1.86% respectively. Factors factored in the anticipation include demand and supply flow in the debt market, global interest rate trend as well as the local economy.