Thailand 10 Year Government Bond

The Siam Commercial Bank's Economic Intelligence Center (SCB EIC) assesses that the Monetary Policy Committee (MPC) will maintain the policy rate at 1% throughout this year and is likely to keep it steady until 2027, as Thailand's economy is expected to grow only 2.1% next year and inflationary pressures will gradually ease. SCB EIC views that sufficiently accommodative monetary policy, coupled with targeted financial measures, will be appropriate to support the still-fragile economy. Meanwhile, rate cuts may not address the specific problems of households and SMEs facing tight financial conditions, and rate hikes are less necessary as inflation risks diminish. At its latest meeting yesterday (August 26), the MPC unanimously voted to hold the rate at 1.0%, viewing that level as accommodative and appropriate, despite headline inflation being lower than expected, but with a tendency to rise due to supply-side factors.

Thailand's government bond yield curve is trending flatter after inflation slowed more than expected and the economy weakened, spurring buying of long-dated bonds. A Bloomberg survey expects the spread between 2-year and 10-year bond yields to narrow to about 74 basis points by year-end, from 98 basis points on Wednesday. Thai inflation in July stood at 1.95% year-on-year, down from 2.42% in June and 0.45 percentage points below economists' estimates, marking the biggest miss among Asian emerging markets. Meanwhile, Thailand's economy slowed sharply in the second quarter, further boosting demand for long-term bonds as markets assess that Thai interest rates are likely to stay low. Philip McNicholas, Asian sovereign debt strategist at Robeco, noted that Thailand's yield curve is unusually steep, making long-dated bonds attractive on a value basis and supporting the trend toward a flatter curve, especially if inflation continues to undershoot expectations. The trend could gain further support if the U.S. Treasury yield curve moves in the same direction, following Treasury Secretary Scott Bessent's announcement of a long-dated bond purchase program, which could help depress long-term U.S. yields. Citigroup strategists said Thailand's yield curve is currently steeper than that of the U.S., leaving room for further flattening, and that Thai long-dated bond auctions have seen increasing support since July. Earlier, Citigroup recommended a strategy expecting the spread between 2-year and 10-year Thai swap rates to narrow to 60 basis points from around 85 basis points currently.

SCB Financial Markets assesses that the baht will move within a range of 32.70-32.95 baht per dollar today. The baht held steady after the MPC voted to keep the interest rate at 1.00%, but weakened overnight in line with the stronger US dollar index, following the core PCE inflation figures coming in at 0.2% month-on-month and 3.3% year-on-year, as expected by the market. Meanwhile, durable goods orders for July increased by 1.1%. Crude oil prices fell after reports that Iran and Oman reached a revenue-sharing agreement regarding the Strait of Hormuz, and the House of Representatives approved the 400 billion baht emergency loan decree with a vote of 285 to 141, to address the energy crisis and restructure the country.

Thai e-Finance News Agency reported that the Bank of Thailand may delay policy rate cuts through next year to cope with low economic growth. An analysis by efinAI points to a scenario where the Monetary Policy Committee will keep the policy rate at its current level, despite increasing pressure from an economic slowdown. Delaying cuts could help preserve room for future policy action, while the market is watching for signals of a shift in the interest rate direction at the next meeting.

Bank of Ayudhya (BAY) revealed that the baht moved steadily near 32.72 baht per dollar after the Monetary Policy Committee (MPC) unanimously voted to keep the policy rate at 1.00% per year, as the market expected. It also assessed that the MPC will maintain the low rate for several more quarters to support still-weak domestic demand. The MPC noted that economic expansion is benefiting from the upcycle in technology and AI, but remains low and uneven, with the economy expected to grow 2.3% and 1.8% in 2026 and 2027, respectively. While exports and private investment expanded better than expected, private consumption was below expectations, and general inflation pressures in 2026 and 2027 are expected to be lower than previously assessed. BAY expects the MPC to hold the rate at 1.00% for several quarters ahead, as economic growth below potential and weak domestic demand will limit the pass-through of higher cost prices. The next MPC meeting is scheduled for October 28, 2026.

The Civil Aviation Authority of Thailand reported total passenger volume in the second quarter of 2026 at 31.79 million, down 25.04% from the previous quarter, comprising 14.65 million domestic passengers and 17.13 million international passengers. Total flights came to 211,532, down 18.71%, while air cargo expanded 1.23% to 421,513.04 tonnes, supported by exports of agricultural products and fresh fruit. The conflict in the Middle East led to the suspension of 1,896 flights from Thailand to the Middle East, a loss of 637,121 seats of passenger capacity, and a 6.21% decline in Thailand-Middle East routes to 5,827 flights. Thailand-Europe routes rose 4.68% to 5,952 flights. Persistently high Jet A-1 fuel prices are pressuring airline costs. The CAAT has therefore approved an international route fuel surcharge ceiling to reflect actual costs, while instructing relevant agencies to increase the domestic air navigation service charge reduction from 25% to 30%, cut aircraft parking fees by 50%, and extend payment deadlines for landing and parking charges by one month per instalment. The CAAT confirmed it will not raise the domestic fare ceiling and will oversee passenger rights protection measures under Civil Aviation Board Regulation No. 101. Meanwhile, the Monetary Policy Committee voted unanimously to keep the policy rate at 1.00% per annum, amid a trend of headline inflation in 2026 rising to an average of 2.9% and the economy expanding by only 1.5%, risking stagflation alongside inflation.

Poon Panichpibool, money and capital market strategist at Krungthai Global Markets, Krungthai Bank, said the Bank of Thailand may keep rates unchanged throughout this year and next, but Thai 10-year bond yields have fallen to 1.90% to 2.00%, a fair value zone, making them less attractive. He recommends gradually buying only when yields rise, and views Thai 20-year bonds as more interesting in terms of yield curve steepness, though investors must accept higher volatility. Meanwhile, US 10-year yields eased to 4.65% after the producer price index came in below expectations, but risk-on sentiment and Middle East uncertainty limited the decline. KTB continues to recommend gradually buying long-dated US and Thai bonds when US 10-year yields climb above 4.50%, expecting the Fed to hold rates in 2026 before cutting twice in 2027. The dollar moved sideways with no clear direction, with the DXY index hovering around 99.9 points. Gold futures for December 2026 delivery on COMEX slipped further toward $4,400 per ounce on profit-taking and Middle East uncertainty.

The trading value of Thai bonds this week rose by about 145% from the previous week to 474.315 billion baht, with net buying of 510 million baht in short-term bonds and net buying of 9.949 billion baht in long-term bonds, while bonds held by foreign investors matured worth 900 million baht, resulting in a net foreign capital inflow of 9.559 billion baht. Government bond yields fell by 1 to 3 basis points amid lower-than-expected Thai inflation and a strong US PMI index.

Poon Panichpibool, money and capital market strategist at Krungthai GLOBAL MARKETS, Krungthai Bank, said the US 10-year bond yield is moving around 4.68 percent, supported by risk-on sentiment and expectations of Fed rate hikes, but capped by hopes for US-Iran ceasefire talks that are pressuring energy prices. He maintained a recommendation to gradually buy long-term US and Thai bonds when the US 10-year yield rises above 4.50 percent, as the Fed is expected to hold rates in 2026 before cutting twice in 2027, in the second and fourth quarters, contrary to the latest Dot Plot and market expectations. The Bank of Thailand is likely to hold rates throughout this year and next. Meanwhile, the Thai 10-year bond yield has fallen to 1.90 to 2.00 percent, which is a fair value zone, reducing its attractiveness. He recommends buying only when yields rise, and views 20-year Thai bonds as more interesting but requiring acceptance of high volatility. On currencies, the dollar strengthened amid risk-on sentiment and better-than-expected US economic data, pushing the DXY index toward the 100 level. Gold prices remain above 4,100 dollars per ounce, pressured by a stronger dollar but supported by ceasefire hopes and buy-on-dip demand.

Thai bond trading value this week, from July 27 to 31, 2026, with three business days, stood at 193.585 billion baht, down about 63% from the previous week. Average daily trading value was 64.528 billion baht. Of this, 43%, or 83.442 billion baht, were bonds issued by the Bank of Thailand, mostly with remaining maturity of no more than six months. Government bonds accounted for 80.216 billion baht, or 41%, while corporate bonds saw trading value of 12.26 billion baht, or 6%. Government bond yields fell by 1 to 4 basis points, tracking US Treasury yields after the United States and Iran temporarily halted attacks. Foreign investment flows saw a net inflow of 10.282 billion baht, with net buying in short-term bonds of 11.745 billion baht and net selling in long-term bonds of 555 million baht.

The Bank of Thailand opened its doors to the Investment Analysts Association for the first time in a decade to discuss the economic direction and monetary policy. Governor Vitai Ratanakorn revealed that the meeting on July 30 covered macroeconomic overview, economic growth trends, inflation, and the policy interest rate direction. The Bank of Thailand signaled a more accommodative monetary policy to support economic recovery, while accelerating structural solutions, particularly household debt and adjusting the financial institution regulatory framework to be more flexible. Discussions also covered financial system stability and tackling gray capital, with the Bank of Thailand presenting ongoing plans and measures to curb illegal funds and reduce long-term impacts on the economy.