Corporate Bond Sales Likely to Drop for Third Straight Year

Corporate bond sales in Thailand may drop for a third straight year as the asset class faces mounting distress amid a weak economic outlook, according to the Thai Bond Market Association (ThaiBMA).

Addressing a news conference on Thursday, ThaiBMA’s Executive Vice President Ariya Tiranaprakij on Thursday said that the bond sales were unlikely to exceed $26 billion in 2025, compared with $26.39 billion last year. This would mark the third year of decline after the total reached a record $$36 billion in 2022, TBMA’s data showed.

Total corporate bond issuance stood at $23.64 billion at the end of the third quarter of 2024, up 54% compared with the same period last year, ThaiBMA said.

The projections come as growth in Southeast Asia’s second-biggest economy lags behind neighbours like Indonesia and Malaysia. High levels of household debt are crimping consumer spending and new investments, according to a report by English daily Bangkok Post.

A majority of Thais expect the domestic economy to be sluggish or for the slowdown to worsen this year, according to the National Institute of Development Administration’s opinion poll released on January 5, the report said.

“There will be more companies requesting more payment delays as the weak economy has really affected their financial health,” Ariya said.

In addition, regulators have been tightening oversight on companies’ bond sales, making it harder for those with below investment-grade ratings, or without assessed creditability, to issue new debt securities, she said.

She said that sales of new high-yield bonds last year slumped 49% to 55 billion baht, leading the decline in overall domestic corporate bond sales. Most investors were still shunning risky bonds of issuers with low credit ratings, she averred.

According to her, about $29.81 billion of existing corporate bonds will mature in 2025 and most of that will be able to be refinanced as the issuers have strong credit ratings, she said.

Rate Cuts

The Bank of Thailand (BoT) is expected to cut rates twice, totalling 50 basis points this year starting in the second quarter this year, the ThaiBMA said.

Last month, the central bank left its key interest rate unchanged at 2.25%, after a surprise cut in the previous review in October. The next rate review is on Feb 26.

Even KGI Securities Co Ltd, which is based in Bangkok, said that it expects the BoT to cut the policy rate by 0.75 percentage points in 2025 due to challenging economic conditions and the government’s limited funds to lift domestic consumption.