Thai Farmers Asset Management, with THB140 billion (USD3.3 billion) in assets, plans to start using over-the-counter derivatives this year on a THB120 billion portfolio of fixed-income assets to take advantage of potential hikes in interest rates. Yingyong Nilasena, first senior v.p., fixed income in Bangkok, said a rise in interest rates would erode the value of its fixed-rate bond portfolio. He added it likely will enter a fixed-to-floating rate swap in its first transaction.
Thai Farmers' fixed-income portfolio consists of domestic corporate bonds and government bonds, Nilasena said, of which over 90% are fixed rate, with an average coupon of 5% and average maturity of 2-2.5 years. The asset manager has been speaking to bank counterparties, he continued, declining to name them.
Paul Hurd, head of global markets, Thailand at Standard Chartered Bank in Bangkok, said more institutional investors are starting to eye the interest-rate swap market because of growing uncertainty over the future direction of interest rates. Although three-month floating rates have dropped to 2.71% from 3.24% over the past month, partly led by U.S. rate cuts, Prime Minister Thaksin Shinawatra warned earlier this month that low interest-rates could spur capital outflows, harming the economy.
