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Published on March 15, 2008

The Finance Ministry will in the next fiscal quarter issue Bt5 billion worth of 30-year infrastructure bonds to finance the construction of mass-transit lines.

"It's the first time that we will launch such long-term bonds. We want to test the market reaction first," Pongpanu Svetarunda, director-general of the Public Debt Management Office, said yesterday.

Currently, the longest term for government bonds is 20 years.

Investors will be invited to join the first 30-year bond auction on April 23 for a lot worth Bt2.5 billion, while the second Bt2.5-billion tranche will be sold in June.

The ministry said life-insurance firms should be interested in the 30-year bonds, as they want long-term assets to match their liabilities.

Based on a recent simulation of the cost of funds via the 30-year bonds, the coupon rate would be 5.05 per cent. The actual interest rate will be known on the bidding day.

Over the next five years, the ministry plans to issue bonds worth more than Bt90 billion to finance the first phase of mass-transit schemes, which require a total investment of Bt260 billion from 2008-2012. Over this period, bonds worth about Bt20 billion a year will be issued.

For the second phase of mass-transit development - or the outer ring worth Bt500 billion, scheduled for implementation from 2010-2014 - the ministry will borrow in the domestic market via the issuance of bonds worth about Bt200 billion, or Bt30 billion-Bt40 billion per year.

State-owned Krung Thai Bank will provide a Bt10-billion back-up facility to allow flexibility for the office in case of unattractive yields at auctions, Pongpanu was quoted by Dow Jones Newswires as saying.

Pongpanu said the ministry would also offer savings bonds to people aged 55 years and over. The two-year bonds worth Bt12 billion will be distributed from April 2-11.

The minimum subscription is Bt10,000 with no upper limit.

Wichit Chaitrong

The Nation