Retail investors snap up government savings bonds
Government savings bonds drew overwhelming interest from retail investors this month as interest rates are expected to decline.
According to Jindarat Viriyataveekul, public debt advisor for the Public Debt Management Office (PDMO), government savings bonds issued in March worth 40 billion baht have been fully subscribed, with individual investors avid buyers, surpassing past issuances.
For the portion allocated to retail investors, which allowed reservations via the Pao Tang app and bookings through representative banks, PDMO allocated 35 billion baht worth of saving bonds.
Demand was immense, exceeding the available reservation amount by double.
Making a reservation through the Pao Tang app takes 95 seconds. Reservations via this channel were limited to 10 billion baht, which quickly reached full capacity, she said.
Mrs Jindarat attributed the significant interest from individuals to the likelihood of interest rate cuts in the near future, coupled with the relatively high coupon rates offered by the bonds.
“The returns on government savings bonds, considered sovereign bonds with high stability, are relatively high compared with instruments that have similar maturities issued by the private sector,” she said.
Mrs Jindarat said the March tranche offered individual investors yields of 3% for a five-year maturity and 3.40% for a 10-year term. For non-profit organisations, the yield is 3% for a 10-year term.
The returns offered to retail investors in the recent issuance were higher than the previous issuance of government savings bonds in May 2023.
The previous series offered a yield of 2.70% for a seven-year term and 2.60% for a 10-year term for nonprofit organisations.
For fiscal 2024, she said PDMO set a target to issue savings bonds totalling 100 billion baht.
The second issuance this year worth an estimated 40 billion baht is expected around July, with the remainder possibly issued by the end of the fiscal year, said Mrs Jindarat.
However, the office may not issue 100 billion baht worth of bonds if government revenue collection exceeds the target, she said.
Mrs Jindarat said the issuance aims to promote savings alternatives for the public, which is why the interest rates are slightly higher than usual.
Though public demand was significant, the PDMO must also take into account the government’s financial cost burden, she said.
The state expenditure budget for fiscal 2024 is set at 3.48 trillion baht, with an estimated net income of 2.787 trillion.
This budget creates a deficit arrangement, requiring government borrowing to bolster its fiscal budget for another year, said Mrs Jindarat.
The government plans to borrow 693 billion baht in fiscal 2024 to offset the budget deficit. The deficit represents 19.9% of the total expenditure budget.