Thai baht corporate bond issuance in 2025 is so far lagging behind its performance a year ago. According to data from Thai Bond Market Association, the issuance volume in the first five months of 2025 amounted to 350.3 billion baht ( US$10.7 billion ), down 11.3% from 395 billion baht in the corresponding period last year.

This comes as institutional investors, while still flushed with liquidity, have become more selective and cautious in their investment-making decisions.

The preference, according to a senior Thai banker, has been towards high- quality papers with strong credit profile amid the fragile economic outlook. With increased cautiousness among institutional investors for certain sectors, issuers have had to rely more on retail investors to meet their funding requirements.

The lower issuance volume reflected the downtrend noted in the fourth quarter of 2024, dragged down by weak debt sales from both the public and private sectors.

Tepid investor confidence

According to Asia Bond Monitor published by the Asian Development Bank, total issuance of local currency bonds amounted to 2.1 trillion baht, down 5.7% quarter-on-quarter. Treasury and other government bond issuances eased 9.4% in the last quarter of 2024 due partly to slightly smaller planned issuance of government bonds at the start of fiscal year 2025 ( October 2024-September 2025 ).

Corporate debt sales fell 13.2% in the fourth quarter of 2024 on the back of tepid investor confidence due to downside risks to economic growth posed by new US administration’s trade policies.

Meanwhile, further downside risks are forecast for Thai baht rates. A DBS group research report on Asian bonds published on June 9 says the Bank of Thailand ( BOT ) has the potential to cut its policy rate by another 75bp over the next 12 months, following the two 25bp reduction in the first and second quarters of the year.

“Despite narrowing monetary policy space, this easing trajectory is relatively aggressive compared to other Asian central banks due to underperforming growth. Economic growth will likely slow amid external uncertainty,” DBS explains.

Strategy-wise, the report says Thai government bond yields will likely fall further, with a steepening yield curve as the core theme.

ESG-related issuance

Amid the downtrend in local currency bond issuance, issuers and investors continue to embrace sustainable and ESG-related Thai baht bonds. Issuers, especially those with offshore businesses/stakeholders have increasingly incorporated ESG angles into their financing plans, the senior Thai banker points out, given global trends and increasing pressure from stakeholders.

More institutional investors have incorporated ESG investment into their key performance indicators ( KPIs ) and the government's promotion of ESG-linked funds also fuelled demand for ESG-related investment.

Thailand’s sustainable bonds are predominantly instruments issued by the public sector. The country’s sustainable bond market grew 18.1% year-on-year to reach a size of US$24.1 billion at the end of December 2024. Sustainability bonds comprised a majority of sustainable instruments at US$15.8 billion, accounting for a market share of 65.6%, followed by green bonds with US$4.4 billion, or a market share of 18.4%.

Over two-thirds of the outstanding sustainable bonds were government-issued instruments, which typically have longer maturities, while over 98% of sustainable bonds in Thailand were denominated in local currency, which remained the highest share among all emerging East Asian markets.

Indeed, the Thai bond market remains a local currency play. We are inviting Thai baht fixed-income investors to share your thoughts with us as part of Asset Benchmark Research’s ( ABR ) Local Currency Bond Survey.

Please access the survey by clicking here.

Relevant respondents can choose the Best of Sellside individuals across research, sales, and trading as well as the top sellside institutions for 2025. Voting closes at the end of June 2025.