Financial Markets Group Siam Commercial Bank (SCB Financial Markets: SCB FM) revealed US government bond yields. Last month was very volatile according to economic numbers, and it is expected during the coming period that it will continue to move sideways at a high level by monitoring the results of the Federal Committee meeting. For an open market which is expected to maintain interest rates and interest rates. Personal Consumption Expenditure Numbers: SCB FM expects the 10-year Treasury yield to range at around 4.15-4.45% this month. Regarding Thai interest rates, the market believes that the MPC will gradually cut interest rates twice this year. However, there is a possibility that the Monetary Policy Committee will cut interest rates faster than market estimates. The interest rate may be cut twice in a row in April and June, so clients are advised to close interest risks quickly. The value of the baht strengthened last month in line with gold prices and regional currencies. But with the weakness resulting from US inflation figures in the coming period, it is expected to move sideways in the 35.50-36.00 range.
Mr. Patrick Polya, Assistant General Manager Financial Markets Executive Siam Commercial Bank Public Company Limited revealed that the yield on US government bonds (US Treasury bond yields) fluctuated significantly last month in line with the US economic figures. In periods when numbers were worse than expected (such as ISM and factory orders), returns declined very quickly. But after the US Consumer Price Index (CPI) and Producer Price Index (PPI) came in higher than expected, Treasury yields are back on the rise. Mr. Patrick sees Treasury yields going forward likely to move sideways at a high level, looking at the 10-year yield in a range of approximately 4.15-4.45% during this one-month period.
What should be monitored during this period is the results of the US Federal Reserve (FOMC) meeting, and there is a possibility that the Fed will send a hawkish signal, causing yields to rise slightly, which are: 1) The Fed is likely to adjust its economic forecasts upwards Employment (payroll) numbers came in better than expected. Working hours have increased and at the same time, wages are still expanding nicely and 2) there is a chance that the point chart will be adjusted higher this time because SCB FM estimates that the neutral nominal rate at the end of this year may be around 4.5%, prompting the Fed to maintain at the neutral nominal interest rate at the end of this year. Dot chart this year, however, in 2025-2026, the neutral rate is likely to be around 3.9% and 3.6%, which gives an opportunity to adjust the Dot chart.
However, there are still factors that could cause US Treasury yields to decline, such as the US inflation (Core PCE) number in February which tends to slow. From the service sector price index (supercore) such as financial services, health services, and food services, including the recent period, returns have risen rapidly. If the market starts cutting interest rates again, there is a possibility that there will be a correction that leads to lower yields.
As for the Thai interest rate outlook, the market sees the MPC gradually cutting interest rates twice this year, with an 80% chance of cutting rates first in April and then cutting them again in October. However, SCB sees the chance that the MPC will cut interest rates faster than the market expects, which is higher. The interest rate may be cut twice in a row in April and June because 1) Thailand's neutral interest rate is lower due to lower economic potential due to structural problems. Therefore, the MPC may cut interest rates to further support the economy. 2) the average headline inflation rate for this year is expected to fall to 0.8%, which is below the target range of the Bank of Tunisia, and 3) the quality of personal loans will continue to deteriorate. Especially car loans, credit card loans and personal loans. Therefore, SCB FM suggests that clients may consider a fixed interest rate through THOR OIS for 5 years at around 2.25% because 1) the slope of the 5Y curve remains high and 2) the Thai economy tends to expand low due to structural factors. This makes it possible that interest rates in the medium to long term could fall to lower levels. For clients who want to borrow money and lock in interest rate costs, SCB FM sees the chance of the MPC cutting interest rates more than twice this year is slim. Therefore clients may consider the payment to be fixed with THOR OIS 2y of around 2.00% or less.
Exchange Rate Market Last month, the value of the baht depreciated less than expected due to 1) slower-than-expected US economic figures (weak data), 2) gold and Bitcoin prices continually rising to new record highs, and 3) the value of regional currencies. The yuan strengthened on news of government measures and inflation numbers that returned to positive. As for the Japanese yen, the yen's strength was previously strengthened due to news of the Bank of Japan raising interest rates.
To get a perspective on the baht in the coming period, the average baht is expected to be in the range of 35.70-36.20 over the next month. The factor that could cause the baht to fall is the Federal Open Market Committee meeting this week. If the US dollar falls against 36.10-36.40, it will be seen as a decline. The level at which exporters may consider selling, factors that may lead to a strengthening of the baht are: US inflation numbers that may slow and a correction in Bitcoin prices that may cause a decline in gold prices. If the US dollar price rises against 35.40-35.70, it is seen as a level Importers may consider purchasing it.
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