The interest spread of corporate bond issuance has increased by 0.3-0.5% after a rise in bond supply in the first quarter, says the Thai Bond Market Association (TBMA).
Ariya: Increase in corporate supply
The increase is seen among corporate bonds with 5-10 years of maturity, said TBMA senior executive vice-president Ariya Tiranaprakit.
The interest spread of long-term government bonds, defined as those with over 10 years of maturity, has also edged up 0.05-0.08%, Ms Ariya said.
"An increase in the corporate bond supply in the primary bond market has pushed up [interest] spread," she said.
The interest rate cost for corporate bonds with AA ratings is 3.35%, while A-rated bonds and BBB+ debentures are at 3.29% and 4.32%, respectively. Interest cost for the five-year government bond is 2.2%.
According to the TBMA's monthly report for January, there were 30 new long-term corporate bonds worth a combined 68.17 billion baht denominated in baht and listed in the TBMA's secondary bond market from 20 issuing companies.
In February, there were 42 types of bonds issued from 27 issuers, worth a combined 44.33 billion baht.
Data from the Securities and Exchange Commission indicates that many big companies have raised funds from corporate bond issuance since the start of this year.
In February, Thai Beverage issued three sets of debentures worth 11 billion, 12 billion and 34 billion baht, while Magnolia Quality Development issued debentures worth 1.5 billion baht.
This month, debentures will be issued by Siam Cement Group (15 billion baht), Nam Ngum 2 Power Company (800 million baht worth of debentures and 5.2 billion for amortised debentures), Krung Thai Card (2.5 billion baht) and Areeya Property Plc (1.5 billion baht).
Minor International is also scheduled to issue debentures during March 25-28.
Ananda Development will issue debentures worth 4 billion baht at the beginning of April.
The bond interest rate spread normally declines if market supply falls, but this is unlikely to occur this year, Ms Ariya said, as demand to raise funds from the private sector is abundant in terms of debenture issuance for refinancing issued debentures that will reach maturity and demand to raise new debentures to fund business operations.
For non-rated bonds and smaller bond issuers, interest costs vary from 5% to 7.5% depending on collateral assets, but corporate bond issuance is another funding choice for small companies because banks have a group lending limit regulation, she said.
The aggregate net profit of 533 companies listed on the Stock Exchange of Thailand fell by 1.45% year-on-year in 2018 to 931 billion baht.
The dip in aggregate net profit was due to companies associated with commodity products registering lower net profit in the fourth quarter because of lower-value inventory amid ebbing prices for crude oil, petrochemical products and steel, according to the SET.
Full-year combined sales revenue was 11.87 trillion baht, up 10.36% year-on-year.
