Thailand's 2-year bond yields have.........>

THAILAND: Thailand's 2-year bond yields have surged by 25bps over the past month

alone as traders price out any further monetary easing by the BOT. The 2-year

yield now sits at 1.48%, roughly in line with the BOT's overnight rate of 1.50%.

- As we argued in a previous article "Higher Global Rates May Push Bank of

Thailand To Act" (For Full Story See Main Wire, 03/13), while the BOT maintains

a neutral stance, arguing that rising global rates do not warrant higher Thai

rates, THB weakness will pile on the pressure for the bank to shift to a hawkish

stance.

- The BOT's next monetary policy decision comes on May 16, and MNI expects the

bank to remain on hold but note the increased risk of keeping overnight rates at

1.50% amid rising upward pressure on rates and inflation globally.

- Should global oil prices continue to rise, the BOT could find itself in a

difficult spot given the country's high level of energy dependency, resulting in

a combination of weakening growth and rising inflation.