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Thai dollar bonds, CDSs slump after coup

Thailand's dollar bonds and credit default swaps slumped on Wednesday after the Thai army seized power.

india Updated: Sep 20, 2006 08:57 IST

Thailand's dollar bonds and credit default swaps slumped on Wednesday after the Thai armed forces seized power without firing a shoot and dismissed Prime Minister Thaksin Shinawatra's government.

Thailand's five-year credit default swaps—insurance-like contracts that offer protection against debt default or restructuring—widened by 10 basis points (bps) to 42/47 bps.

The coup prompted Fitch Ratings and Standard & Poor's to put Thailand's credit rating on review for a possible downgrade.

Thailand is rated BBB+ by both Fitch and S&P, the third lowest investment grade rating.

The baht recovered slightly in Asian trading on Wednesday from seven-week lows hit overnight.

Perpetual hybrid tier I securities issued hours before the coup by Krung Thai Bank were bid at 300 bps above 10-year US. Treasuries, widening from a launch price of 265 bps over.

They had widened earlier to 330/270 bps over Treasuries in response to the coup news.

Krung Thai Bank, Thailand's second-largest lender, raised $ 200 million from the tier I issue, callable in 2016.

Thai Oil's 2015 bonds moved out by about 10 bps to 145/135 bps over Treasuries.

"The Thai baht and Thai assets are under pressure, and that is likely to continue near term but may open attractive buying opportunities once the situation stabilises," Standard Chartered Bank said in a note.

"Pressure can spill over to other regional markets. That should not be sustained for too long, and may open other opportunities."

First Published: Sep 20, 2006 08:21 IST