Thailand is setting up a liquidity fund to buy as much as 100 billion baht (US$3.03 billion) of high-quality corporate debt, and a lending facility to support bond mutual funds and money market funds, as the Southeast Asian country steps up efforts to boost investor confidence amid the coronavirus pandemic.
The Bank of Thailand (BoT) will also increase its purchases of government bonds if needed, according to a joint statement from the central bank and the Ministry of Finance on March 22.
“These measures are expected to provide liquidity and help the normal functioning of the financial market and help build investors’ confidence,” they say.
The state-backed Government Pension Fund and Government Savings Bank will, together with the Thai Bankers’ Association and insurance companies, set up a liquidity fund of between 70 billion baht–100 billion baht to purchase “quality and newly issued corporate bonds that cannot fully roll over maturing corporate bonds”.
In addition, BoT will set up a special facility to support investment grade bond mutual funds and money market funds that face a liquidity crunch amid the global market turmoil. Commercial banks can use their holdings in the bond mutual funds as collateral to borrow from the facility.
BoT also says it “stands ready to make additional purchases of government bonds to lower the volatility of the government bond yield and ensure the normal functioning of the government bond market”.
It bought over 100 billion baht of government debt between March 13 and March 20.
The central bank on March 20 unexpectedly cut its key interest rate by 25 basis points to a record low 0.75%.
Thailand reported 721 infections and one death from Covid-19, the disease caused by the coronavirus, as at March 23.
