Everything points to a rate cut
The money market has high expectations that the Monetary Policy Committee (MPC) will cut its policy interest rate in next week's meeting as the repurchase interest rate and government bond yields have been in continuous decline.
The 14-day repurchase rate has declined constantly since Friday when it was 4.375 per cent, down from 4.53125 per cent the day before. It fell to 4.34375 per cent and 4.3125 per cent on Monday and Tuesday. The rate fell by 0.22 percentage points within three days after hardly changing since the policy rate's cut on February 28. However, the one-day repurchase rate - the policy rate - remains fixed at 4.5 per cent. The seven-day interest rate has not declined in line with the longer-term rate due to high demand among banks in the short-term money market. The central bank said some commercial banks forecast that the MPC would slash the key rate, resulting in a decline in the 14-day repurchase rate. The BOT's report also said that the seven-day rate had not diminished because some banks wanted to borrow to compensate for their deficit for clearing over the next seven days. The Finance Ministry has put pressure on the BOT to cut the rate enough to boost growth and cool down the baht. The market expects the central bank will cut the rate by 0.5 basis points to 4 per cent. The one-year yield was at 3.81 per cent on Tuesday, lower by 0.56 percentage point from MPC's last meeting on February 28. The two-year yield was also down 0.52 percentage point. A source from the Thai Bond Market Association said the yield curve would bounce back by 0.2 percentage point if the central bank cut the rate by only 0.25 basis points. "The market has already priced in the 0.5 percentage point. The more it expects the big cut, the more the market will be disappointed, leading to a huge swing back of the yield curve," he said.
Anoma Srisukkasem The Nation
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