Thailand: Home is where the loans are
Savings bonds and Japanese soft loans are proving more alluring than the international capital markets for Thailand. The government and state enterprises appear to be backing away from the US and Eurobond markets in favour of cheaper funding from domestic sources as local interest rates fall.
The Kingdom of Thailand had planned to raise up to $5 billion in global bonds, but this now seems to have been put on hold as it soaks up domestic savings and takes advantage of cheap Japanese money on offer.
US spreads have tightened for the existing Thai sovereign issue, due 2007, to around 210 basis points, having been flung out as far as 900bp during the Russian crisis earlier in the year, and there is also talk of a ratings upgrade, but all this has so far failed to convince Thailand of the need for fresh overseas borrowings.
The Thai authorities' confidence took another hit with Malaysia's $1 billion 10-year offering in May, scaled down from a previously announced $3 billion issue, which was launched at 330bp over treasuries, prompting talk of a "Mahathir premium" on the bond.