Yields on Thai government bonds (bond yields) have risen steadily since the beginning of 2021. For the 10-year Thai government bond, its yield surged to the highest level in two years and eight months, at 2.05 percent, so far this year. We at KResearch assess that the yield on the 10-year Thai government bond will likely exceed 2.00 percent during the remainder of 2021 and gradually increase further during 2022 as the US economy will likely be able to maintain its path towards recovery while the US labor market is set to fully bounce back, thus prompting the Fed to withdraw some of its monetary easing policies in 2022. This may affect the directions of US bond yields and in turn cause Thai government bond yields to increase later on.
Given this, the Thai public and private sectors may have to brace for higher funding costs in such bond markets during 2021. KResearch assesses that an increase in interest burden via such bond markets may grow by approximately THB9.05-10.80 billion during 2021, and this situation will be seen during 2022.
For the Thai public sector, KResearch is of the view that it has a rather flexible way in managing sources of funds. The rising funding costs may not affect its fiscal position and stability much because such costs amount to a relatively small share of the overall budget limit. For the Thai private sector, the impact of rising funding costs may vary among companies, depending on their credit ratings, financial positions and ability to recover revenues. If their performances pick up along with the economic recovery, they should be able to cope with the rising interest burden. However, for companies issuing debentures, the fact that the economy and business environment have yet to return to normalcy may inhibit their efforts in recovering income, managing financial costs and seeking other source of funds for liquidity enhancement at this time.