THAILAND will sell 55 billion baht ($1.6 billion) of sovereign bonds to retail investors next month, on course to raise a record amount from savings notes to lower its reliance on the volatile institutional market for funding.

The Finance Ministry’s issuance of savings securities will total 165 billion in the fiscal year ending Sept. 30, 33% higher than it was a year ago and more than the 150 billion baht it planned earlier, according to Public Debt Management Office Director-General Patricia Mongkhonvanit Monday.

“There is a lot of government bond supply in the secondary market, so we decided we would raise funds by selling savings bonds now,” said Patricia, adding that bond yields in the institutional market have stabilized and that the ministry aims to “avoid an oversupply situation” of government securities.

Thailand has tried to lower the costs of its bond borrowing from surging yields by tweaking the mix of short- and longer-term debt instruments it has sold as well as by using a variety of borrowing tools. Selling bonds to the general public achieves the government’s dual goal of not just reducing how much it taps institutional investors, but also gets retail investors to develop a savings alternative to bank deposits.

Southeast Asia’s second-largest economy is expected to borrow around 1.1 trillion baht this fiscal year from many types of debt instruments, excluding savings bonds. Government borrowing should drop next fiscal year as the burden of COVID-relief spending eases, Patricia said. Thailand has issued special laws that allowed it to borrow as much as 1.5 trillion baht during the pandemic.

The yield on benchmark 10-year Thai bonds has spiked by more than 90 basis points this year in tandem with those of US Treasury bonds. At its peak earlier this month, the yield jumped to a more-than-seven-year high even though the Bank of Thailand held the nation’s key rate at a record low of 0.5% to support the country’s nascent economic recovery.   

The savings bonds to be sold in June is the last of three tranches slated for the current year and will be used for funding the country’s budget deficit. The average yield for the 5-year bonds will be 2.9% and 3.6% for the 10-year bonds, Patricia said. — Bloomberg