Government plans to float dollar, yen bonds

GOVERNMENT DEBT NEW ISSUES

Government plans to float dollar, yen bonds

WICHIT CHANTANUSORNSIRI

The Public Debt Management Office is gearing up to float new dollar- and yen-denominated bonds in the international debt markets to help establish a benchmark for Thai corporate issuers, said director-general Pongpanu Svetarunvra.

He said the timing was right for the Finance Ministry to go abroad, as offshore funding costs were below those of the local market.

Authorities plan to issue a Samurai bond in the Japanese market in April 2008 to help refinance existing debt, followed later with a dollar-denominated Yankee bond.

''We don't have any real need to issue debt, considering that we can borrow dollars for terms of five to 10 years from either the European or Asian markets at a potentially lower cost than in the US market,'' Mr Pongpanu said.

''If we do issue in the US, we would want to go for a long-term issue, say of 30 years, which the US market is well capable of accepting.''

Chakkrit Parapuntakul, director of the PDMO's International Finance Bureau, said seven-year Samurai bonds carry an annualised yield of 1.27%.

A Thai government issue in Japan would likely cost 20 to 40 basis points over current yields, or the equivalent of 1.47% to 1.67%, which is still cheaper than the 2.7% annual interest paid on existing yen borrowings by the government.

Mr Chakkrit said the government currently owed around 53 billion yen coming due next May, which the PDMO wants to refinance through new bond issues.

Mr Pongpanu added that the PDMO had approved applications from 10 international financial and sovereign institutions to issue baht-denominated local bonds in the first half of the year, totalling 48.9 billion baht.

Among the agencies seeking to issue domestic bonds are Agence Francaise de De{aac}veloppement (AFD), the Central American Bank for Economic Integration, the Japan Bank for International Co-operation and KfW.

The baht-denominated issues by international agencies are part of a government plan to help diversify the domestic bond market.

The Finance Ministry also plans to follow 41 billion baht worth of bond issues made in the first quarter of fiscal 2008 with another 50.95 billion in the fiscal second quarter from January to March 2008.

The bonds, which have durations of five, 10, 15 and 20 years, are aimed at creating new benchmarks for the bond market as well as raise funds to cover the budget deficit.