Thai inflation-linked bond to prompt copycat issues

Author: | Published: 15 Jul 2011

The first inflation-linked bond by the Kingdom of Thailand should spark copycat deals. But slow buy-in from regulators was just one of the challenges of bringing the deal to market.

Thailand’s BT40 billion ($1.33 billion) 10-year bond closed to institutional investors last week and to retail investors on Wednesday. It was the first inflation-linked bond sale in south-east Asia and the first to generate demand through book-building, as opposed to auction.

However, a lack of buy-in from Thai regulators almost derailed the bond issue at the outset.

Bank of Thailand’s pre-deal regulations classified inflation-linked products as structured products. In doing so, it prevented many asset managers from investing in the instrument.

Thailand’s Office of the Insurance Commission (OIC) had provisions in place that prevented domestic insurance companies from buying into an indexed product.