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Foreigners may shift out of Thai bonds amid low returns -association - Reuters

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BANGKOK, Jan 12 (Reuters) - Foreign investors may opt to move out of Thai bonds this year due to low returns, after holdings hit a record high in 2021 and with the prospect of the benchmark interest rate only rising late in the year, an industry body said on Wednesday.

Foreign investors bought 144 billion baht ($4.31 billion) of Thai bonds last year, with foreign holdings hitting a record level of about 1.03 trillion baht ($30.85 billion), or 6.8% of the total, by the end of 2021.

"Last year, Thai inflation was low and bond yields were high compared with other countries, drawing foreign investors into the market, but this year it may reverse," Tada Phutthitada, president of the Thai Bond Market Association (TBMA), told a news conference.

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U.S. bond yields are expected to rise this year, while Thai yields may move more slowly because of the low inflation rate, which has been contained by government subsidies, said Tada.

The association forecasts around 1 trillion baht of new corporate bond issues this year, in line with last year's 1.03 trillion baht, which was up 50% from 2020.

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The central bank might decide to hike its policy interest rate (THCBIR=ECI) in the last quarter of 2022, if the spread of Omicron variant of the coronavirus and inflation were no worse than market forecasts, said Tada.

The Bank of Thailand has kept the benchmark rate at a record low of 0.50% for 13 consecutive meetings to support the economic recovery. It will next review monetary policy on Feb. 9.

($1 = 33.3900 baht)

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Reporting by Satawasin Staporncharnchai Editing by Ed Davies

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