Thai Baht: What Are the Curve-Steepening Risks as BoT Holds Rates? – DBS

Thailand’s short-end government bond yields are expected to remain stable, but longer-dated yields face risks of a steepening curve, according to DBS Group Research economist Chua Han Teng. Assessing Thai markets after the Bank of Thailand (BoT) left its policy rate at 1.00% for a fourth consecutive meeting, he expects rates to stay on hold through 2026. He cautions that global energy and food prices, alongside spillovers from US Treasuries, pose steepening risks at the long end.

What does the BOT stance imply for the yield curve?

"The Bank of Thailand (BoT) maintained its policy rate at 1.00% for the fourth consecutive decision on October 28, with limited impetus for any adjustment in the near term."

"We continue to expect the BoT to keep its policy rate at 1.00% for the remainder of 2026, providing a stable backdrop for short-end government bond yields."

"We see steepening risks for Thailand’s yield curve."

"While short-end government bond yields should be stable, long-end yields are vulnerable to upward pressures from external challenges, including the pass-through effects of global energy and food price shocks, spillovers from higher and elevated US Treasury yields, and weak domestic public finances."

"The Thai baht, which has depreciated by ~7% against the US dollar and underperformed its regional peers year-to-date, is unlikely to be a major policy concern, given strong external buffers that should help mitigate currency volatility and related risks."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)