Kot bond market booklet q2 fy2015

KINGDOM OF THAILAND BOND MARKET FINANCING THAILAND’S FUTURE & CONNECTING ASEAN

Highlight Special Savings Bond “Suk Gun Ter Rao” Thailand’s Inaugural Bond Switching The Gateway for CLMV Countries Financing

Progress Update

» Funding Needs FY2015 » Greenshoe Option: Privilege for MOF Outright PDs » Savings Bond FY2015 » GOVT Bond Auction Schedule Q2/FY2015 » PDMO Bond Calendar FY2015 Basic & Essentials

» Public Debt Outstanding and Its Composition » Bond Market Capitalization and Its Composition » Government Bond Auction Result » Non-Resident Holding in Domestic Bond Public Debt Management Office, Ministry of Finance, Kingdom of Thailand

Q2/FY2015

Thai GOVT Bond Market Overview Highlight Special Savings Bond “Suk Gun Ter Rao” Thailand’s Inaugural Bond Switching Baht Bond : The Gateway for CLMV Countries Financing

Progress Update 21 23 24 25 26

 Funding Needs & Benchmark Bond Supply FY2015  Greenshoe Option : Privilege for MOF Outright PDs  Savings Bond FY2015  GOVT Bond Auction Schedule Q2/FY2015  PDMO Bond Calendar FY2015

Basic & Essentials Public Debt Outstanding (as of Oct 2014) Bond Market Capitalization (as of Dec 2014)

5,640,578 THB Mil. (46.50% of GDP) 9,303,626 THB Mil. (78% of GDP)

30 31

Total GOVT Debt (Direct + FIDF) (as of Nov 2014)

3,372,107 THB Mil. (41 Bond Series)

34

Well-Developed Bond Market Improved GOVT Direct Debt Profile Dramatically (as of Oct 2014) » Average-Time-to-Maturity (ATM) 10yrs 9mths » Average Cost 4.0% » Well-Balanced Fixed : Floating Ratio 88 : 12 » Well-Distributed Maturity Profile 46:17:37 (<5 : 6-10 : >10yrs)

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Non-Resident Holding in Domestic Bond » NR Holding in THB Bond   

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(as of Dec 2014) GOVT Bond : BOT Bond : Others :

» Annual Capital Flow (YTD)  GOVT Bond :  BOT Bond :

683,215 THB Mil. (7.36% of Thai Bond Market Cap.) 625,483 THB Mil. (18.1% of GOVT Bond Outstanding) 56,980 THB Mil. (2.1% of BOT Bond Outstanding) 752 THB Mil. -24,165 THB Mil. +29,642 THB Mil. -53,807 THB Mil.

Special Savings Bond “Suk

Gun Ter Rao”

Total Issuance : 100,000 THB mil.

MinistryofofFinance Finance Ministry

Bank for Agriculture and CoBank of Agriculture and Agricultural operatives Agricultural Co-operatives

Issue Size

50,000 THB mil.

50,000 THB mil.

Tenor

10-Years

5-Years

Coupon Rate (p.a.)

1yr - 3yr 3% 4yr - 7yr 4% 8yr - 10yr 5%

3.80%

Sale Amount Eligible Customers

1,000 – 2,000,000 THB mil.

Only for retail and non-profit organization such as foundations, Thai Red Cross Society, and the National Council on Social Welfare of Thailand

January 12th – 23rd , 2015 Sale Period

- 1st Period : January 12th – 18th, 2015 : Maximum purchasing limit at 2 THB mil./person/bank

- 2nd Period : January 19th – 23rd, 2015 : No maximum purchasing limit

Distribution Channels

4 Appointed banks : - Bangkok Bank - Krung Thai Bank - Kasikorn Bank - Siam Commercial Bank

- 1st Period : January 12th – 16th, 2015 : Maximum purchasing limit at 2 THB mil./person/bank

- 2nd Period : January 19th – 23rd, 2015 : No maximum purchasing limit

● 4 Appointed banks : - Bangkok Bank - Krung Thai Bank - Kasikorn Bank - Siam Commercial Bank ● Bank for Agriculture and Agricultural Co-operatives

1

Ministry of Finance Mr. Sommai Phasee Minister of Finance “Medical advancement and improved health care have lengthened longevity of people around the world, Thailand included. As we are moving toward “aging society”, ‘Suk Gun Ter Rao’ savings bond with a long tenor of 10 years becomes an excellent investment opportunity for the senior citizens.

Mr. Rungson Sriworasat Permanent Secretary of the Ministry of Finance “This special issue of savings bond allows quality and safe investment to be within reach of Thai citizens. It is an opportunity for Thai people to join hands with the government to support the country’s economic development.”

Mr. Kritsda Udyanin Director-General of Public Debt Management Office “ The general public can now invest in savings bond starting at only 1,000 Baht. This allows the government to expand our Investors’ base, which support our effort to meet our financing needs.

More importantly, it is an easy first step for each one of us to move towards financial discipline.”

2

Bank of Thailand & Bank for Agriculture and Agricultural Co-operatives

Mr. Prasarn Trairatvorakul Governor Bank of Thailand “Savings and responsible spending ensures financial discipline and security”

Mr. Luck Wajananawat President Bank for Agriculture and Agricultural Co-operatives “Suk Gun Ter Rao” is the first BAAC savings bond issued to the general public. The bond is the safest investment of its kind since it is backed by a government guarantee and budget allocation for the repayment of both interest and principle.

This special issue reaffirms BAAC’s role in the development of the domestic bond market and is a potential financing instrument in future.

3

Special Savings Bond “Suk Gun Ter Rao”

Mr. Vorapak Tanyawong President Krung Thai Bank “Krung Thai Bank has long been one of the distributors of government savings bond. Savings bond is an investment that retail investors have shown a lot of interest in, as there is low risk. Recently, the Ministry of Finance has amended some features to promote the ease of access to savings bond for a wider range of investors with different level of income by specifying minimum investment of only 1,000 Baht.

Therefore, savings bond provides investors with a low risk investment option, while ensuring consistent returns.”

Mrs. Kannikar Chalitaporn President Siam Commercial Bank “Siam Commercial Bank is delighted to take part in this special savings bond ‘Suk Gun Ter Rao’ as it is an opportunity for us to play our part in promoting savings in our society. This savings bond that our bank is acting as one of the distributors is low risk with appropriate returns. SCB’s readiness in terms of coverage of ATM outlets and branches allows all retail investors to conveniently access savings bond. This is one of the main factors what will help ensure success of ‘Suk Gun Ter Rao’ savings bond.”

4

Mr. Chartsiri Sophonpanich President Bangkok Bank “Ensuring financial stability is of great importance to of all families, in particular during times of financial and capital market uncertainties. A well-planned financial management through careful selection of assets and risk assessment is crucial each family members financial security and happiness. Savings bond can provide investors with an opportunity to invest in a bond that is extremely low risk but will also provide long term and consistent returns. It is a safe option as it is issued by public sector entities including the Ministry of Finance and/or the Bank of Thailand.”

Mr. Predee Daochai President KASIKORN BANK “KASIKORNBANK is pleased to be one of the distributors of savings bond as it is a low-risk investment with consistent returns. We are also proud to be a part of initiatives to lay the foundation to promote Thailand into a savings society. Apart from distributing ‘Suk Gun Ter Rao’ savings bond to interested investors through branches and ATMs as usual, KASIKORN BANK also provide investors an opportunity to give savings bond as a present for others. This is to deliver happiness to our acquaintances as an aspiration of this ‘Suk Gun Ter Rao’ savings bond.”

5

Special Savings Bond

Mrs. Jariyaporn Klansuwan National Institute of Development Administration Savings Co-Operative Ltd. “Our investment guidelines allow us to invest in a wide range of products, when designing our portfolio we carefully decide on products that is in the best interest of the COOP. Our investment objective is primarily concerned with generating good returns, but capital preservation is also very important to us.

That is why savings bond has always been an integral part of our investment strategy as savings bond is virtually free from principle and interest repayment risks. In addition, we can also use savings bond as collateral in cash management operations with other financial institutions, therefore, it matches our needs in more ways than one.”

Wat Rajabopit Sathitmahasimaram Rajaworavihara “Savings bond generate payments every six months with no risk.

The proceeds will be used to renovate facilities in the temple compound.”

6

7

“Suk Gun Ter Rao” means “happy together”, my new year wish to you all.

Mr. Sommai Phasee Minister of Finance

“An important part of my job is to connect and to deliver government's economic policy to business sectors who can help materialize its potential growth.”

Minister of Finance

From L to R : Mr. Sun Vithespongse, Mr. Prasit Suebdhana, Mr. Amnuay Preemonwong, Mr. Chakkrit Parapuntakul From L to R : Mrs. Pannee Sathavarodom, Mr. Wisudhi Srisuphan, Mr. Manas Jamveha

From L to R : Mr. Rungson Sriworasat, Mr. Paiboon Kittisrikangwan

"The big 4 banks are like rivers of capital providing finance for our economy to prosper.“ Mr. Sommai Phasee Minister of Finance

8

From L to R : Mrs. Kannikar Chalitaporn, Mr. Predee Daochai, Mr. Chartsiri Sophonpanich, Mr. Vorapak Tanyawong with Minister of Finance.

The MOU signing ceremony between 4 appointed banks, BAAC and BOT witnessed by Minister of Finance and PDMO’s DG.

11

20

13

9

5

15

1. Mr. Sommai Phasee 2. Mr. Wisudhi Srisuphan 3. Mrs. Pannee Sathavarodom 4. Mr. Sun Vithespongse 5. Mr. Rungson Sriworasat 6. Mr. Chakkrit Parapuntakul 7. Mr. Amnuay Preemonwong 8. Mr. Prasit Suebdhana 9. Mr. Manas Jamveha 10. Mr. Kritsda Udyanin 11. Mr. Ace Viboolcharern 12. Mr. Paiboon Kittisrikangwan 13. Mr. Bordin Unakul 14. Mr. Tada Phutthitada 15. Mr. Luck Wajananawat 16. Mr. Vorapak Tanyawong 17. Mrs. Kannikar Chalitaporn 18. Mr. Chartsiri Sophonpanich 19. Mr. Preedee Daochai 20. Mr. Thiti Tantikulanan

19

16

12

3

2

1

17

18

10

4

6

Minister of Finance (Ex PDMO’s Executive) Deputy Minister of Finance Advisor to the Minister of Finance (Ex PDMO’s Director-General) Secretary to the Minister of Finance (Ex PDMO’s Executive) Permanent Secretary, Ministry of Finance Deputy Permanent Secretary, Ministry of Finance (Ex PDMO’s Director-General) Deputy Permanent Secretary, Ministry of Finance Deputy Permanent Secretary, Ministry of Finance Director-General, The Comptroller General’s Department Director-General, Public Debt Management Office Deputy Director-General, Public Debt Management Office Deputy Governor, Bank of Thailand Executive Vice President, The Stock Exchange of Thailand President, The Thai Bond Market Association (Ex PDMO’s Executive) President, Bank for Agriculture and Agricultural Co-operatives President, Krung Thai Bank President, Siam Commercial Bank President, Bangkok Bank President, Kasikorn Bank Head of Capital Market Business Division, Kasikorn Bank

7

8

14

9

1

2 3

4

5

6

1

Mr. Nattakarn Boonsri, Director of Government Bond Market Division (L) Mr. Ace Viboolcharern, Deputy Director-General of Public Debt Management Office (R)

2

Dr. Pimpen Ladpli, Acting Executive Director of Bond Market Development Bureau (L) Ms. Pannee Sathavarodom, Advisor to the Minister of Finance (R)

3

Mr. Luck Wajananawat, President of Bank for Agriculture and Agricultural Co-operatives (L) Mr. Kritsda Udyanin, Director-General of Public Debt Management Office (R)

4

Mr. Teeralak Sangsnit, Executive Director of Debt Management Bureau 2

5

Mr. Theeraj Athanavanich, Executive Director of the Public Infrastructure Project Financing Bureau (L) Mr. Wisut Chanmanee, Executive Director of Debt Management Bureau 1 (R)

6

Mr. Paroche Hutachareon, Director of Fund Management and Bond Market Infrastructure Development Division (R) Ms. Laksika Tengpratip, Fiscal Analyst (far R)

7

Mr. Nakarin Prompat, Acting Director of the International Bond Market Policy Division

10

7

11

Thailand’s Inaugural Bond Switching

“…It was the largest single debt transaction in the history of the government and Thai bond market”

Mr. Nattakarn Boonsri, Director of Government Bond Market Development Division

The launch of Thailand’s First Bond switching was extremely successful. Can you please give us some background on why Bond Switching was introduced?

Over the past decade, the Public Debt Management Office (PDMO) has played a leading role in the development of the domestic bond market, which has enabled the domestic bond market to become one of the major source to raise funds for both the private sector and for the government to finance infrastructure projects.

Such significant progress in bond market development required the issuance of Benchmark bonds that is sufficiently large enough (over 100,000 billion baht) to establish the yield curve and enhance liquidity.

Given the significant increase in the size of bond issuance, debt refinancing instrument will be the most crucial part to smooth out our debt portfolio. In the past, to refinance or restructure the debt, we have relied on Back to Back financing on the day of the maturity of the bond and Pre-funding within one year prior to the maturity date. These transactions have proved to be adequate but we needed various tools that can help further support future bond market development initiative. We then explored the possibility of using bond switching and found it to be as effective as current tools in reducing refinancing risk and to avoid bunching of debt. But the main difference is that bond switching can prevent refinancing risks while at the same time enhance liquidity in the secondary market.

In addition, we also believe that it is beneficial to investors in terms of providing another option for portfolio management. This is why we felt that it can become a very effective and useful tool.

12

How does Bond switching work?

In order to understand the mechanism of bond switching, allow me to explain some key terms; 1) “Source Bond” is a Bond that has been identified by PDMO to be restructured and 2) “Destination Bond” is bond with longer maturities that can be either an “on the run” existing benchmark or a newly issued bond. Bond switching allows the bond holder of the source bond to exchange for the destination bond. This therefore, allows the PDMO to achieve both of objectives of supporting bond market development while at the same time prevent refinancing risks.

What were the steps taken to ensure the right bonds were selected?

When we introduce new instruments, either new product issuance or debt management tools, we always undertake thorough impact assessment and careful steps to ensure successful execution and limit any significant impact on the market. Prior to the launch, our team went through the following steps 1) Assess country examples from those with successful bond switching transactions including UK, Sweden, Germany and Australia.

2) Exchange ideas on concepts and methods with domestic investors to find the right features for the Thai market.

3) To facilitate the transaction, an understanding between all agencies involved needed to be reached on concept, accounting, pricing and operation of the exchange on bonds. 4) Finally, we identify the appropriate Source bond and Destination bond. For Thailand’s first bond switching on the 28 November 2014, we chose the LB155A with remaining maturities of 6 months as the Source bond and identified four maturities (3-24 years) for the Destination Bond (Table 1).

The wide ranging maturities ensure that all types of investors are covered including financial instrument, mutual funds, long term investors and Non-Residents.

Table 1 : Bond Switching Amount Classified By Destination Bond

Bond LB176A LB191A LB21DA LBA37DA Total

Maturity Date 2 Yrs. months 4 Yrs. month 7 Yrs. 23 Yrs.

New Issued Amount (THB Mil 22,683 20,883 9,436 18,015 71,017

Percentage 32 30 13 25 100

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Are you pleased with the results of the transaction?

Yes, we are really pleased that it was very well received by the investors as that was one of our main objectives. The transaction in an amount of 76,235 billion THB is the largest single debt transaction in the history of the government and Thai bond market. The transaction reduced the outstanding amount of LB155A by around 50%, extended the maturity from 6 months to 8 years and 9 months. The transaction also helped enhanced liquidity of the destination bonds and more importantly, the transaction did not have any negative impact on the market (Figure 1).

In addition, we are also pleased to see that it has covered all types of investors as initially intended during our selection process (Figure 2).

Figure 1: Thailandâ&#x20AC;&#x2122;s inaugural bond switching results THB Mil. 350,000

Source Bond Destination Bond Switched Amount 300,000

250,000

200,000

LB155A

150,000

-76,235 MB

100,000

LB616A

LB446A

LB416A

LB406A

LB396A

133,015 133,015

LBA37DA LB383A

LB326A

LB316A

LB296A

LB27DA ILB283A LB283A

LB25DA LB267A

LB24DA

LB244A

210,546 210,546

LB21DA

LB22NA LB233A LB236A

LB19DA

LB213A LB214A ILB217A

66,883 66,883

LB191A LB193A LB196A LB198A

LB17OA LB183A LB183B

LB16NA LB171A LB175A LB176A

LB15DA LBF165A LB167A

76,337 76,337

LBF14NA LB14DA LB155A LB157A

0

218,683 218,683

50,000

Figure 2: Bond Switching Amount classified by investorsâ&#x20AC;&#x2122; type Foreign Investor

Bond Switching Participated amount classified by Investor

5% Long-term Investor

32%

Financial Institution

63%

Investor

Amount THB Mil.

Percentage

Financial Institution

47,366

63%

Long-term Investor

24,737

32%

Foreign Investor

4,132

5%

Total

76,232

100%

Investor Segmentation in Bond Switching classified by Destination Bond LB176A Yrs.

LB191A

months

Yrs.

19,636 mil.

month

LB21DA

LBA37DA

Yrs.

Yrs.

18,589 mil

84%

79%

14,788 mil.

77%

2,015 mil 1,758 mil 9%

7%

Financial Long-term Foreign Institution Investor Investor

4,020 mil 17%

5,416 mil 1,014 mil 4%

Financial Long-term Foreign Institution Investor Investor

54%

3,914 mil.

39%

734 mil 7%

Financial Long-term Foreign Institution Investor Investor

3,725 mil.

20%

626 mil 3%

Financial Long-term Foreign Institution Investor Investor

What is in the pipeline for future bond switching transactions?

Given the success of the inaugural bond switching transaction, bond switching will have an important role to play in PDMO’s future debt management plans in terms of reducing refinancing risks. We believe that it will be frequently used as our portfolio contains a lot of bonds with maturities more than 50,000 billion THB. In fact, the next bond switching transaction will be LB15DA with outstanding amount of 132,000 billion THB during the first half of 2015.

We very much hope that the upcoming transaction will be just as successful and well received by the investors.

In the meantime, we are in process of reviewing the feedbacks and relevant details to add any possible improvement for future transactions (Figure 3).

Figure 3: Potential bonds for future bond switching transaction THB Mil. 350,000

LB196A FY 2019

300,000

301,994

250,000

LB176A FY 2017

218,683

LB21DA FY 2022

200,000

150,000

210,546

LB236A FY 2023

197,850

LB15DA

LB616A

LBA37DA

FY 2016

FY 2061

133,015

132,000 ILB217A

FY 2029

FY 2021

102,534

100,872

100,000

129,142

LB296A

2584

2587

129,142

LB616A

LB446A

52,000

LB416A

LB406A

LB396A

95,936

68,581

2575

LBA37DA LB383A

2572

LB326A

2571

LB316A

102,534

70,780 77,730 61,950 LB25DA LB267A

LB244A

LB24DA

LB296A

2566

LB27DA ILB283A LB283A

50,700

2564 2565

197,850

210,546

69,000

LB21DA

2562

LB22NA LB233A LB236A

2561

LB213A LB214A ILB217A

2560

100,872

54,800

2559

LB19DA

66,883 69,000

301,994

LB191A LB193A LB196A LB198A

75,000

86,632

218,683

LB17OA LB183A LB183B

55,000

52,000

LB16NA LB171A LB175A LB176A

LBF14NA LB14DA LB155A LB157A

0

LB15DA LBF165A LB167A

132,000

50,000 50,000

2604

Potential Source Bond for Bond Switching (Outstanding size ≥ 100,000 million baht) Potential Source Bond for Bond Switching (Outstanding size ≥ 50,000 million baht) Government Bond

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Baht Bond : The Gateway for CLMV Countries Financing

“…Cross border funds mobilization can open up new opportunities for infrastructure investment which is critical to enhancing connectivity and play a part in promoting inclusive growth for ASEAN”

Mr. Nakarin Prompat, Acting Director of International Bond Market Policy Division

How important is Baht Bond to the PDMO’s Bond Market Development Initiative?

The PDMO has always been committed to developing the domestic bond market and the initiatives to promote financial market integration remains high on our priority list, in particular, at a time when ASEAN will become a single market at the end of year 2015. We believe that Baht Bond will not only add diversity and scope to support domestic bond market development but more importantly, it offers our ASEAN neighbors to tap into our domestic for project financing it their own countries. Cross border funds mobilization can open up new opportunities for infrastructure investment which is critical to enhancing connectivity and play a part in promoting “inclusive” growth for ASEAN. In order to efficiently implement Baht Bond initiative, the Baht Bond committee (the Committee) chaired by Director-General of Public Debt Management Office (PDMO), with representatives from PDMO, the Bank of Thailand (BOT) and the Securities and Exchange Commission (SEC) as committee members, has been established.

Although, the initiatives started more than 10 years ago in 2004, in the early days, progress have been very gradual, but thanks to the commitment from all parties involved the Bath Bond initiatives have progressed significantly in the last few years.

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Can you please elaborate on the progress made? In particular on issues regarding which entities are now able to issue Baht Bond in Thailand?

Initially, Baht Bond issuers were limited to International Financial Institutions such as International Bank for Reconstruction and Development (IBRD), Asian Development Bank (ADB), Japan Bank for International Cooperation (JBIC). However, in order to become one of the regional financing centers, the Committee revised and gradually expanded the scope of qualifications of Baht Bond applicants for up to 6 times within the last ten years (2004-2014). Since then the committee has allowed foreign entities with a minimum of an accredited international credit rating of A- to submit applications, increasing supply of high quality bonds in the Thai market. Furthermore, to support the issuance of debt instruments under Asian bond framework, the committee has eased credit rating requirements to foreign government or agency issuers with debt guaranteed by the foreign government or Credit Guarantee and Investment Facility (CGIF), or a combination of a guarantee by CGIF and domestic credit rating of issuer’s country.

What about CLMV countries?

Recently the Baht Bond committee has facilitated the issuance of Baht Bond by entities from Cambodia, Laos PDR, Myanmar and Vietnam (CLMV). As I mentioned earlier, and I would like to stress here again that, allowing CLMV to tap into our market not only critical to promoting ASEAN financial markets integration but it also play a part in supporting inclusive growth for ASEAN countries, especially in CLMV. Applicants for Baht bond with a minimum domestic credit rating of investment grade (BBB-) of a credit rating agency approved by SEC are now eligible to apply. In order to manage adverse effects and balance of bond quality and funding cost in the local market, the Committee maintains a limit of total issuance by CLMV countries that will be revised from time to time. We are pleased that our efforts has led to EDL-Generation Public Company, a state agency from Laos PDR, successfully issued 6,500 million baht debenture with a local credit rating at BBB+, in 12 Dec 2014.

IFIs

2004 The beginning of Baht Bond 1

(i) International Bank for Reconstruction and Development (IBRD) (ii) Asian Development Bank (ADB) (iii) Japan Bank for International Cooperation (JBIC)

InternationalCreditRating

2006

Relaxation

2011

Relaxation

2

Special Purpose Vehicle

2012

Relaxation

3

Issuer’s Government Guarantee

2013

Relaxation

4

Credit Guarantee and Investment Facility

2014

Relaxation

5

2014

Relaxation

6

(S&P’s, Moody’s, Fitch)

(SPV)

CITI

CABEI

CARGILL

CBA

DB

EBI

HANA

IBK

ING

KDB

KEXIM

KfW

SEK

WOORI

No issuance LAO PDR (3 times) 3Y (1,2,3) 3,728 mil (MOF) 5Y (2,3) 4,396 mil.

7Y (3) 1,466 mil.

Noble (Hong Kong) 3Y

Total 9,590 mil.

2,850 mil.

(CGIF)

Proportion Guarantee : Guarantor/Issuer Rating

CLMV :

Local Credit Rating [Investment Grade]

Permit granted but No issuance EDL-Gen

5Y 7Y 10Y

1,500 mil.

2,000 mil.

3,000 mil.

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What is the current size of Baht Bond and who has issued baht bonds?

At the end of December, 2014, outstanding of Baht Bond is 91,374 million baht. Even though, it accounts for only 1% of total domestic bond market but it is a growing component with continued commitment for further enhancement from all relevant parties. More than half of Baht Bond outstanding was issued by Korean issuers, however in the past 2 years after relaxing requirements of Baht Bond applicants, there was a significant increase in Baht Bond outstanding issued by entities from CLMV counties. The government of Lao PDR has issued Baht Bond at 9,590 million baht by using the waiver of credit rating requirements to foreign government as well as the recent issuance of EDL-Generation Pubic Company. We expect more issuance in years to come as entities from CLMV countries have expressed strong interest in financing by Baht Bond issuance in Thailand.

IFIs (1,000 THB Mil.)

THB mil.

30,000

31% (27,900) CA-CIB KEXIM

Laotian Issuers

18

%

25%

(16,090 THB Mil.)

(22,409)

59%

Others

22%

NOBLE 20,000 AFD

IBK

Korean Issuers

(54,300 THB Mil.)

(19,984 THB Mil.)

CBA ING

10%

CABEI 10,000

KEXIM

Woori

2015

KEXIM

Hana

CITI

5% (5,000)

Woori EDL-Gen

KEXIM

ADB

Lao PDR

Lao PDR

Lao PDR

Woori

2016

2017

2018

2019

2020

CABEI

Korean Issuers

Source: PDMO at the end of December, 2014

18

7% (6,330)

Woori

Lao PDR 0

6%

(5,668)

Hana

Woori

(9,066)

Laotian Issuers

6% (5,701) CABEI KEXIM

2%

EDL-Gen

(1,500)

Lao PDR

KEXIM

2021

2022

IFIs

3%

3%

2%

(2,800)

(3,000)

KEXIM

EDL-Gen

KEXIM

2023

2024

2025

Others

(2,000) Year

Guidelines for Considerations of Applicant's qualifications The Committee has divided the evaluation criterions into two dimensions; Bond market impact (merit base) and Qualifications of applicants (qualification base). Factors of market impact that are considered include; impact to market participants, market liquidity, SWAP, baht currency fluctuation, the possibility of fund mobilization for investment in Thailand. As for qualifications, applicants must comply with MOF’s policy and regulations as well as SEC’s registration and disclosure requirements.

What is the application process (Rounds of consideration) for interest issuers?

After some changes since the beginning of Baht Bond, considerations of Baht Bond applications are now scheduled into 3 rounds per year. Applications must be submitted within March, July or November and the permitted applicants will be allowed to issue Baht Bond within 9 months period. Any permitted applicants that were unable to issue Baht Bond within the specific period will not be eligible to re-submit their application in the following round of the granted period.

What’s next for Baht Bond?

The Ministry of Finance is planning to modify Baht Bond regulations and procedure to be consistent with global standards. It will focus on the adjustment of rounds of consideration, improvement of regulations, steps in the issuance process of Baht Bond, qualifications of countries who willing to apply for Baht Bond permission, together with the possibility of the allocation of partial fund for entities in ASEAN to be in line with entry into AEC by the end of 2015.

We are the process of considering feedbacks from previous Baht Bond arrangers, so that we can make the right improvements in terms of rules & conditions amendments to suit all relevant parties and support the year of ASEAN Economic Community.

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Progress Update

 Funding Needs FY2015  Greenshoe Option on LB21DA : Privilege for MOF Outright PDs  Saving Bond FY2015  GOVT Bond Auction Schedule Q2/FY2015  PDMO Bond Calendar FY2015

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2015 - 2022

Government Funding Needs

560,000 THB Mil. per Year Public Debt Management Office, Ministry of Finance, Kingdom of Thailand

On-Lending 59,XXXMB

Substitution for foreign currency bond

New Borrowing

New Borrowing

4,XXXMB

Insurance Decree

300,000MB

2,XXXMB

86MB

Per year

47,414MB

Infrastructure Investment

2,400,000MB

(2015-2022)

Deficit Bill To be announced on 13 Jan 2015

GOVT Rollover 260,000MB

-0-

52,000

52,000

Per year

149,209

231,000

304,181

181,506

127,830

118,209

208,994

6,300 6,300

102,255

182,493

149,209

231,000

304,181

181,506

127,830

118,209

208,994

6,300

102,255

182,493

85,545

104,607

271,599

100,000

101,800

(2015-2022)

FY 2015

FIDF

113,014

340,122

191,095

129,124

FY2011 113,014

FY2012 340,122

FY2013 191,095

FY2014 129,124

FY2015F FY2016F FY2017F FY2018F FY2019F FY2020F FY2021F FY2022F 37,900 109,000 -085,545 104,607 271,599 100,000 101,800

109,000

FY2011

FY2012

FY2013

FY2014

FY2015F FY2016F FY2017F FY2018F FY2019F FY2020F FY2021F FY2022F

705,XXX THB Mil.

Total Fund Raising Plan

* Include Infrastructure Investment Public Debt Management Office, Ministry of Finance, Kingdom of Thailand

315,XXX MB

New Borrowing

-TentativeOn-Lending

Deficit

2,XXX 4,XXX

250,XXX

On-Lending Refinance

Roll Over 390,XXX MB

59,XXX

National Catastrophe Insurance Fund Substitution for foreign currency loan

(Pre-Fund)

29,XXX

66,XXX

Rollover 209,XXX Govt Debt Rollover FIDF Debt

Savings Bond Promissory Notes and Others

Inflation-Linked Bond

40,XXX

Amortized Bond

55,XXX

Loan Bond

Benchmark Bond

445,XXX THB Mil.

5-10-15-30â&#x20AC;&#x201C;50-yrs

350,XXX

86,XXX

By Bills

By Instruments

21

-

Benchmark Bonds : 5-10-15-30-50-yrs Inflation-Linked Bonds : ILB 15-yrs Amortized Bond : LBA 25-yrs

ALL FY2015 Government Bond

Public Debt Management Office, Ministry of Finance, Kingdom of Thailand

-Tentative445,xxx MB

Total Benchmark Bonds

Million Baht

5

Top-up

300,000

Benchmark Bonds

Auction Size

5-yrs (LB21DA)

18,000-20,000

10-yrs (LB25DA)

12,000-16,000

15-yrs (LB296A)

8,000-10,000

30-yrs (LB446A)

8,000-10,000

50-yrs (LB616A)

8,000-10,000

ILB (ILB283A)

4,000-5,000

LBA (LBA37DA)

8,000-10,000

Total

350,xxxMB

95,xxxMB 50

200,000

Top-up

Top-up

30

Top-up

15

Top-up

10

Top-up

100,000

Top-up

25

15

FY 2015

LB616A LB616A

LB446A LB446A

LB383A LB396A LB406A LB416A

LBA37DA LBA37DA

LB316A LB326A

LB283A LB296A LB296A

LB267A LB27DA

ILB283A ILB283A

LBF14NA LB14DA LB155A LB157A SB15NA LB15DA SB165A LBF165A SBST166A LB167A LB16NA SB16DA LB171A LB175A LB176A LB17OA LB183A LB183B SB189A LB191A LB193A LB196A LB198A LB19DA LB213A LB214A LB21DA LB21DA ILB217A LB22NA LB233A LB236A LB244A LB24DA LB25DA

0

T-Bills Plan Q2/2015 Public Debt Management Office, Ministry of Finance, Kingdom of Thailand

THB Mil.

Basis Points

45,000

Q1

Q2

Q3

3 months 23 Feb 2015 3 Mar 2015

10,000 MB

30,000

Q4

3.0

10,000 MB

1) 2)

4.5

15,000

1.5 1.46

0.5

0

0.28

0.0

1 month

-0.56 -0.78 -0.9 -1.1

-15,000

22

-1.1

-1.42

Oct-14

-1.34

Nov-14

-1.5 Dec-14

Jan-15

Feb-15

Mar-15

Apr-15

May-15

Jun-15

Jul-15

Aug-15

Sep-15

15

Inflation-L

Greenshoe Option

Privilege for MOF Outright PDs In FY2015 Public Debt Management Office, Ministry of Finance, Kingdom of Thailand

Series

LB21DA (5-Yr Benchmark Bond .. Exclusivity)

Accepted Rate

Average Accepted Yield (AAY)

Maximum Amount

Additional 20% of the allocated amount

Exercise Period

T (After Auction Period between 11.00-11.30 a.m.)

Settlement Date

T+2

Greenshoe

Greenshoe

Greenshoe

Greenshoe

0 - 4,000 MB.

0 - 4,000 MB.

0 - 4,000 MB.

0 - 4,000 MB.

LB21DA

LB21DA

LB21DA

LB21DA

LB21DA

1st auction 20,000 MB. 21 Oct 14

2nd auction 20,000 MB. 14 Jan 15

3rd auction 20,000 MB. 25 Feb 15

4th auction 20,000 MB.

5th auction 20,000 MB.

LB21DA 6th auction 4,000 – 20,000 MB.

Auction + Greenshoe = 100,000 - 116,000 MB. Greenshoe Option will begin in January 2015 regarding to the readiness of the BOT’s add-on electronic auction system

23

Structure Shift â&#x20AC;Ś Savings Bond was a Main Instrument for Government funding under the economic crisis

35%

4Savings %

Government Debt Securities

Bond Outstanding

1,500,000 MB

(Classified by Types of Investors) BOT

NR

% of Investors in Government Debt Securities

29

18%

Proportion of Household and Non-profit in Government Debt Securities

%

Household and Non-profit

5%

Insurance and Other Corporation

40%

4% Depository Corporation

33%

1,000,000

483,839 MB

500,000

381,796 MB

424,311 MB 366,490 MB

Today

4

%

163,174 MB 73,577 MB 65,577 MB 30,000 MB 163,174 MB 18,000 MB (at the end of December 2014) -0-

Savings Bond outstanding in Thai bond market

25,000 MB 0% FY

24

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

20 17

2018

2021

0

2014

Savings Bond : Safe Haven for Retail Investors A B C D E

Savings Bond Outstanding at the end of December 2014

163,174 MB 2009

2010

2011

1. SB15NA 2. SB165A

2012

2013

2014

(9 Series) 2016 2016

2015

FY2016 Expiration of 3 SB FY2017 Expiration of 2 SB FY2018 Expiration of 2 SB FY2021 Expiration of 1 SB FY2024 Expiration of 1 SB

2017 2017

2018 2018

2019

2020

89,597 THB Mil. (55%) 8,000 THB Mil. (5%) 35,577 THB Mil. (21%) 11,836 THB Mil. (8%) 18,164 THB Mil. (11%) 2021 2021

2022

2023

2024 2024

The Last SB will be expired in next 10 years

4,000 MB

3,367 MB

3. SBST166A 82,230 MB

4. SB16DA 5. SB175A 6. SB17DA 7. SB189A 8. SB217A 9. SB247A

Bond Tenors

A

4,000 MB

4,000 MB

B 4,000 MB

31,577 MB

C 11,836 MB

D 18,164 MB As of December 30th, 2014

E

25

LB296A = LBA37DA = LB446A = LB616A =

ILB283A =

LB21DA = LB25DA =

Maturity Date

Re-open

Re-open

12-Dec-2025

Re-open

17-Dec-2021

3.65%

Coupon

3.85%

30,000

40,000

Total

16,000

14,000

20,000

20,000

LB25DA 10-yrs

25 Mar 2015

18 Mar 2015

11 Mar 2015

3 Mar 2015

25 Feb 2015

18 Feb 2015

11 Feb 2015

4 Feb 2015

28 Jan 2015

21 Jan 2015

14 Jan 2015

7 Jan 2015

Auction Date

LB21DA 5-yrs Exclusivity

Re-open

12-Mar-2028

1.25%

15,000

5,000

5,000

5,000

Inflation-Linked Bond

ILB283A 15-yrs

22-Jun-2029

4.875%

10,000

10,000

LB296A 15-yrs

Re-open

Re-open

Re-open

12-Dec-2037

4.26%

9,000

9,000

LBA37DA 25-yrs Amortized Bond

4.675%

19,000

10,000

9,000

LB446A 30-yrs

29-Jun-2044

Government Bond Auction Schedule for Q2/FY2015

17-Jun-2061

4.85%

6,000

6,000

LB616A 50-yrs

129,000

14,000

5,000

10,000

20,000

10,000

11,000

9,000

21,000

20,000

9,000

Total

26

Q2

Q1

Mar 2015

Feb 2015

Jan 2015

Dec 2014

Nov 2014

Oct 2014

23

16

9

2

23

16

9

2

26

19

12

5

29

22

15

8

1

24

17

10

3

27

20

13

6

Auction T-bill

Auction T-bill

Auction T-bill

Auction T-bill

Auction T-bill

Auction T-bill

First day of submission for Baht Bond Application (2/2015) First day of submission for MOF Outright PD's Application

Auction T-bill

Auction T-bill

Auction T-bill

Auction T-bill

Auction T-bill

Auction T-bill

First day Issue Special Saving Bond (5y and 10y) : 100,000 MB

Auction T-bill

Auction T-bill

Auction T-bill

Auction T-bill

Auction T-bill

Tue

25

18

11

4

Auction LB446A (30y) : 10,000 MB

24

17

10 Auction T-bill

3

24

17

10

3

27

25

18

11

4

25

18

11

4

28

21

14

13Retail Only

20

7

31

24

17

10

3

26

19

12

5

29

22

15

8

1

6

30

23

16

Auction LB296A (15y) : 9,000 MB

Auction LB21DA (5y) : 20,000 MB ILB283A (15y) : 4,000 MB 28 Roadshow Debt Switch : Announce Destination Bonds

21

14

7

2 Issue Regular Saving Bond 2/2015(3y) : Retail Only 4,000 MB (1 Dec 14 - 31 Mar 15) 9

Auction T-bill

Auction T-bill

Auction T-bill

First day of submission for Baht Bond Application (1/2015)

Auction T-bill

Auction T-bill

Auction T-bill

Auction T-bill

Mon

MPC

Auction LB25DA (10y) : 14,000 MB

Auction ILB283A (15y) : 5,000 MB

Makha Bucha Day

Auction LB21DA (5y) : 20,000 MB

Auction LB296A (15y) : 10,000 MB

Auction LB616A (50y) : 6,000 MB ILB283A (15y) : 5,000 MB

Auction LBA37DA (25y) : 9,000 MB

MPC

Auction LB25DA (10y) : 16,000 MB ILB283A (15y) : 5,000 MB

Auction LB21DA (5y) : 20,000 MB

Auction LB446A (30y) : 10,000 MB

New Year's Eve

Auction LB616A (50y) : 9,000 MB

Constitution Day

Auction LB25DA (10y) : 12,000 MB ILB283A (15y) : 4,000 MB

Auction LB446 (30y) : 9,000 MB

Auction LBA37DA (25y) : 10,000 MB

Auction ILB283A (15y) : 4,000 MB

MPC

Auction LB296A (15y) : 8,000 MB LB616A (50y) : 9,000 MB

Wed

26

19

12

5

26

19

12

5

29

22

15

8

1

MPC 25

18

11

4

27

20

13

6

30

23

16

9

2

Quarterly PD Market Dialogue

MOF Outright PD Committee : Quarterly PD's Evalution

New Year's Day

Quarterly PD Market Dialogue

MOF Outright PD Committee : Annual PD's Evalution

Chulalongkorn Day

Thu

PDMO Bond Calendar FY 2015

Public Holiday

Baht Bond 1/FY2015

H.M. the King's Birthday

Last day of submission for Baht Bond Application (1/2015)

Quarterly Macroeconomics Report (FPO)

Fri

27

20

13

6

27

20

13

6

Last day of submission for MOF Outright PD's Application

Last day Issue Special Saving Bond (5y and 10y) : 100,000 MB 30 Quarterly Macroeconomics Report (FPO)

23

16

9

2

26

19

12

5

28

21

14

7

31

24

17

10

3

18

11

4

28

21

14

7

30

23

16

9

2

26

19

28

21

14

7

28

21

14

7

31

29

22

15

8

1

22

15

8

1

24Retail 25 Only

17

10

3

27

20

13

6

29

22

15

8

1

25

18

12

5

Sat Sun

11

4

27

Q4

Q3

Sep 2015

Aug 2015

Jul 2015

Jun 2015

May 2015

Apr 2015

31

7

14

21

28

4

30

6

13

20

27

3

22

29

28

8

7

21

1

31

15

25

24

14

18

17

11

24

23

10

16

15

Quarterly Macroeconomics Report (FPO)

2

1

9

26

25

8

19

Visakha Bucha Day

5 Issue Regular Saving Bond 2/2015(3y) : Retail Only 4,000 MB (4 May - 31 Aug 15) 12

18

11

4

28

27

14

21

Songkran Festival Day

20

13

7

6

Chakri Day

31

30

Coronation Day

Songkran Festival Day

Last day of submission for Baht Bond Application (2/2015)

30

23

16

9

2

26

19

12

5

29

22

15

8

1

25

18

10

3

27

20

13

6

29

22

15

8

1

MOF Outright PD License granted to a new member

MPC

H.M. The Queen's Birthday

MPC

Last day of submission for Baht Bond Application (3/2015)

Mid-year Bank Holiday

Quarterly PD Market Dialogue

MPC

MPC

Songkran Festival Day

24

17

10

3

27

20

13

6

30

23

16

9

2

26

19

11

4

28

21

14

7

30

23

16

9

2

24

25

18

11

4

28

21

14

7

31

24

17

10

3

27

20

12

5

29

22

Baht Bond 3/FY2015

Buddhist Lent Day

National Labour Day (Only Bank closes)

Baht Bond 2/FY2015

26

19

12

5

29

22

15

8

1

25

18

11

4

28

21

13

6

30

23

16

9

2

25

18

11

4

27

20

13

6

30

23

16

9

2

26

19

12

5

29

22

14

7

31

24

17

10

3

26

19

12

5

Remark : Royal Ploughing Ceremony Day- waiting for an annoucement This schedule is subject to change without prior notice.

Annual PDMO-Market Dialogue

MOF Outright PD Committee : Final Review

Asarnha Bucha Day

First day of submission for Baht Bond Application (3/2015)

CGIF MOC Meeting

MOF Outright PD Committee : First Application's Review

15

8

Quarterly Macroeconomics Report 1 (FPO)

Long-term Investor Meeting

17

10

3

Basic & Essentials Public Debt Outstanding (as of Oct 2014) Bond Market Capitalization (as of Dec 2014)

5,640,578 THB Mil. (46.50% of GDP) 9,303,626 THB Mil. (78% of GDP)

Total GOVT Debt (Direct + FIDF) (as of Nov 2014)

3,372,107 THB Mil. (41 Bond Series)

Well-Developed Bond Market Improved GOVT Direct Debt Profile Dramatically (as of Oct 2014) » Average-Time-to-Maturity (ATM) 10yrs 9mths » Average Cost 4.0% » Well-Balanced Fixed : Floating Ratio 88 : 12 » Well-Distributed Maturity Profile 46:17:37 (<5 : 6-10 : >10yrs)

Non-Resident Holding in Domestic Bond (as of Dec 2014) » NR Holding in THB Bond  GOVT Bond :  BOT Bond :  Others :

28

» Annual Capital Flow (YTD)  GOVT Bond :  BOT Bond :

683,215THB Mil. (7.36% of Thai Bond Market Cap.) 625,483 THB Mil. (18.1% of GOVT Bond Outstanding.)

56,980 THB Mil. (2.1% of BOT Bond Outstanding.)

752 THB Mil.

+29,642 THB Mil. -53,807THB Mil.

 Funding Infrastructure Investment  Connecting ASEAN

Domestic Bond Market in Transition

Public Debt Management Office, Ministry of Finance, Kingdom ofofThailand Public Debt Management Office, Ministry of Finance, Kingdom Thailand

Funding Infrastructure Investment Connecting ASEAN Ongoing Project (2013 - 2016)

Market Deepening Oriented (2010 - 2012)

Market Infrastructure

2,400,000 THB Mil. Long-Term Infrastructure Inv’t

Thai Khem Khang (350,000 THB Mil.)

Full Funding Capacity : 1,150,000 THB MB.

Regional Connectivity / AEC

Debt Folio Enhancement

2,000,000 THB Mil. Long-Term Infrastructure Inv’t

Water Decree (350,000 THB Mil.)

Sustainable Source of Fund

Baht Bond (Foreign Issuers Bond)

Credit Guarantee Investment Facility (CGIF) Foreign Currency Bond Baht Bond (CLMV)

ATM Lengthened

Well-Distributed Investor Base

Cost Lowered

Well-Balanced Fixed-Floating Ratio

FIDF Decree Passed = 70,000 THB Mil. Fiscal Space

Well-Distributed Maturity Profile / Bond Switching Bond Switching (1st execution: 28 Nov 14)

Appointed 14 MOF-Outright PD

Strengthening PD system

Activated Public Debt Management Fund

(Exclusivity, League Table, Greenshoes Option)

STRIPS Bond Scripless Retail Savings Bond  Liquidity

Innovation / Product Development

Inaugural 10-yr Inflation-Linked Bond (10-yr)

Super- Size Inaugural 25-yr Back-End Amortized Bond

Long-term Fixed Promissory Notes (25-35-45-yr)

Re-open ILB 7 yr or Launch ILB 30yr

Electronic Retail Savings Bond (3-5-yr)

STRIPS Transaction

Quarter PDMO one-on-group “MoF Outright PD” Dialogue

Quarter PDMO one-on-one PD Dialogue 30

Building Yield Curve / Enhancing Liquidity

Annual PDMO Market Dialogue

Annual PDMO Market Dialogue

Market Consultation

15 10 7 5 3

Bond Day 50

20

8 Tenors of Benchmark Bonds

300,000 MB

Liquidity-Oriented

150,000 MB Outstanding Amount 3 5 7 10 15 20

30

50

29

Public debt Outstanding (as of October 2014) = 5.64 THB Trillion (46.50% of GDP) Public Debt Management Office, Ministry of Finance, Kingdom of Thailand

Components of Public Debt

Units : THB Mil.

1. Government Debt (excluded FIDF) 2. Government Debt (for FIDF) 3. Non-Financial Sate Enterprise Debt 4. Special Financial Institutions Guaranteed Debt

5. Autonomous Agency Debt

2,879,968* 1,073,848 1,083,994 592,320 10,448

5,640,578

Public Debt Outstanding

Autonomous Agency Debt

0.19% 0.015 THB Trillion

Special Financial Institutions Guaranteed Debt

10.50

% 0.59 THB Trillion

*including 75,476.40 THB Mil. of External Debt

Non-Financial

GOVT Debt 51.06%

Sate Enterprise Debt

19.04

% 1.08 THB Trillion

2.88 THB Trillion

GOVT Debt (for FIDF)

19.22

% 1.07 THB Trillion Source : Information Technology Centre, PDMO

Forecast Public Debt to GDP

Public debt projection will be in line with fiscal sustainability framework and less than 50% of GDP Public Debt Management Office, Ministry of Finance, Kingdom of Thailand

% % to to GDP GDP

70% 70%

Sustainability Framework Sustainability Framework Sustainability Framework Public Debt/GDP 60% PublicPublic Debt Debt/GDP to GDP < 60% <<60%

60% 60% 50% 50%

47.18%

47.1%

47.5%

45.3% 42.0% 43.9%

46.3%

40% 40% 30% 30%

Repayment Repayment Budget/Budget Budget/Budget Expenditure Expenditure << 15% 15%

20% 20% 9.5%

7.1% 9.3%

7.4% 7.4%

Public Debt to GDP Public Debt to GDP

(Approved by the Public Debt Policy and Supervision Committee)

2020f 2020f

2019f 2019f

2018f 2018f

2016f 2016f

Repayment Budget/Budget Expenditure Repayment Budget/Budget Expenditure

Source: Policy and Planning Bureau, December 2014 , Public Debt Management Office, Ministry of Finance

30

8.7%

Balance BalanceBudget Budget 2015f 2015f

2014f

0% 0%

9.1% 9.3%

2017f 2017f

10% 10%

Bond Market Cap. = 9.3 THB Trillion ($307 Bil.)*

GOVT Bond = 3.5 THB Trillion ($116 Bil.)*

Public Debt Management Office, Ministry of Finance, Kingdom of Thailand

% Share of GDP

Domestic Bond Market Classified by Issuer

140%

128%

119%

120% 100%

106%

80%

75%

60% 40%

24% Asian Fin. Crisis

20%

Bank Loan /GDP

Equity/GDP

Bond Market / GDP

December2014

12%

0%

Maturity Profile BOT vs GOVT Bond BOT ATM = 5mths GOVT ATM = 5yrs 2mth *End of Dec 2014

10% 71% ≤

18% 29%

20%

22%

30%

1<yr≤3

3<yr≤5

5<yr≤10

10<yr≤50

End of December 2014

*Source: BOT Exchange rate as End of Mar 2014

Full Capacity* of All Government Funding Instruments

1,150,000 THB Mil. per Year ($35 Bil.)**

* Under favorable market liquidity + using All funding instruments

Public Debt Management Office, Ministry of Finance, Kingdom of Thailand

% 5.50 5.25 5.00

LB 3 yrs LB 5 yrs LB 7 yrs LB 10 yrs LB 15 yrs LB 20 yrs LB 30 yrs LB 50 yrs

($4.6 Bil.)** ($3.6 Bil.) ($2.4 Bil.) ($2.4 Bil.) ($1.8 Bil.) ($1.8 Bil.) ($0.9 Bil.) ($0.6 Bil.)

150,000 THB Mil. 120,000 THB Mil. 80,000 THB Mil. 80,000 THB Mil. 60,000 THB Mil. 60,000 THB Mil. 30,000 THB Mil. 20,000 THB Mil.

Thailand’s Loan Bonds (LBs) weighting in international indices

GBI-EM Global JP Morgan

iBoxx Asia ex Japan Markit

7.0%

Asian Local Markets HSBC

7.8%

7.6%

Benchmark Bond

Last Update : June 2014

4.75 4.50 4.25

50

4.00

30

3.75

20

3.50

15

3.25

Government Funding Instruments

3.00

Infrastructure

10

2.75

7

liquidity

5

2.50 2.25

The “Missing Composition” of Leader role in the Bond Market

Benchmark Bond

3

($18.2 Bil.) ($3.0 Bil.) ($3.0 Bil.) ($2.4 Bil.) ($1.2 Bil.) ($0.9 Bil.) ($6.1 Bil.)

($34.8 Bil.)

Benchmark Bond

~600,000THB Mil. (52%)

Savings Bond

~100,000THB Mil. (8%)

Amortized Bond

~100,000THB Mil (8%)

Inflation-Linked Bond

~80,000THB Mil. (7%)

Promissory Note

~40,000THB Mil. (4%)

Floating Rate Bond Bank Loan

Total

~30,000THB Mil. (3%) ~200,000THB Mil. (18%)

1,150,000 THB Mil. (100%)

2.00

TTM

3 5 7

10

15

Source: ThaiBMA Government Bond Yield Curve (End of Dec 2014)

20

30

50 **Source: BOT Exchange rate (End ofof December 2014) **Source: BOT Exchange rate (End June 2014)

31

t

32

FY2007 – FY2015

Innovation of GOVT Debt Securities

FY 2012-2015

FY 2011

FY 2007-10

Public Debt Management Office, Ministry of Finance, Kingdom of Thailand

30-yr Benchmark Bond

• Lengthen average-time-to-maturity of Total Government Debt Portfolio • Meet Long-term investors’ demand

Floating Rate Bond

• Increase floating debt ratio of Total Government Debt Portfolio • Promote BIBOR (Bangkok Interbank Offered Rate)

Step-up Savings Bond

• Broaden investor base – Retail investors • Low interest burden at the initial periods of bond

Fixed Rate Promissory Note

• Broaden investor base – Insurance / Long-term investors • Non-Benchmark tenors

50-yr Benchmark Bond

• Combat low interest rate + Lengthen average time-to-maturity • 4th country in the world (1st : UK 2nd : France 3rd : China)

10-yr Inflation-Linked Bond (ILB)

• Strong anti-inflationary signal • Deepen the Development of the Bond market • 1st country in Emerging Asian Economies

Electronic Retail Savings Bond

• Lower Minimum Amount to Purchase / Offer throughout the year • Develop the retail bond into an electronic form  Scripless System • Can be purchased via ATM, in addition of Bank Retail Branches

Amortized Bond

• Suitable financing instrument for the government’s investment mega-project in the form of PPP • Pay back the bond principal by installments  Promote the government’s fiscal discipline

Bond Switching & Consolidation

Upgrade PD Privileges

• Allow both issuer and investors to improve their portfolio • Larger outstanding size + Less bond series  Enhance liquidity in the secondary market

PDDF Activated

(Public Debt Restructuring and Domestic Bond Market Development Fund)

15-yr ILB

Baht Bond

CGIF Activated

(Credit Guarantee and Investment Facility)

Equilibrium of Domestic Bond Market Public Debt Management Office, Ministry of Finance, Kingdom of Thailand

Issuers

• 75 percent of Thailand’s debt securities are issued by Government, Bank of Thailand and State-Owned Enterprises

Credit Rating

• 97 percent of Thailand’s debt securities are classified as Investment Grade

Investors

• Thailand’s government debt securities are held by a wide group of investor types

Domestic Bond Market (Classified by Issuers) CGIF 0.03%

BBBNon-rated 2% 3%

Baht Bond 1%

Government

24%

37% SOEs

AA 55%% AA

SOEs SOEs 8%8%

BOT

Total of 9.3 THB Trillion

Source : ThaiBMA (End of December 2014)

Government

38 37%% BOT BOT

30 30%%

30%

Government Debt Securities (Classified by Types of Investors) Household and Non-profit

A A 8% 11%

Corp Bond

8%

Domestic Bond Market (Classified by Credit Rating)

Total of 9.2 THB Trillion

Source : ThaiBMA (End of December 2014)

BOT 4% BOTBOT BOT 66%% NR 85%% NR NR

18%% 17 NR 10 % 18%

Insurance Insurance and and Depository Depository Other Corporation Other Corporation Corporation Corporation % % % %

Insurance Insurance andand Depository Depository Other Corporation Other Corporation Corporation Corporation % % % %

39 36 40 45

3333 3233

Total of 3.4 THB Trillion

Source : BOT (End of November 2014)

FY2008-FY2014 Key Success Indicators

1. Trading Volume 3. Demand Concentration

2. Turnover Ratio 4. Auction Price

Public Debt Management Office, Ministry of Finance, Kingdom of Thailand

Benchmark Bond 5 yrs and Below : Highest secondary trading volume in every year Unit: % Share of Market Trading Volume

5-yr Benchmark Bondâ&#x20AC;&#x2122;s Higher Turnover Ratio : Even the higher outstanding size, turnover ratio is still more than 2 times Unit: Times

LB155A LB133A

27% 9

29%

28%

21%

20%

20%

26%

LB133A

3.1

1.5

7% FY07

LB145B 4.2

FY08

FY09

FY10 FY11

FY12

FY13

FY14

FY07

FY08

LB15DA

4.2

FY10

FY11

LB196A LB196A

2.9

2.8

2.4

FY09

LB176A

FY12

FY13

3.2

FY14

Top 10 GOVT Bond Series : Accounted for 90% of all GOVT bond trading volume in secondary market

Well-Developed Benchmark Bond Pays Off : Even with greater size of issuance, the cost of funding is still at market rate

Unit: % Share of Secondary Trading Volume

Unit: USD Bil. +0.9 bps

90% 90%

75% FY07

76% FY08

77%

80%

92%

+1.4 bps

84%

12.8

FY10

16.5

15.9

13.7

14.6

223363 +1.2 bps

7.5 7.5 FY09

+3.2 bps

14.7

FY11

FY12

FY13

FY14

FY08

-0.2 bps

-0.4 bps FY09

FY10

FY11

FY12

FY13

-2.7 bps FY14

To be Updated

33

Total GOVT Bond = 41 Series

Tier 1 > 100,000 THB Mil. in Size (83% of Trading Volume)

(3,372,107 THB Mil.)

Tier 2 > 50,000 THB Mil. in Size

(End of November 2014) THB Mil.

FY2015 Q1 Market Share of Trading Volume in Secondary Market

Tier 1: >100,000MB

350,000

(16% of Trading Volume)

Public Debt Management Office, Ministry of Finance, Kingdom of Thailand

(9 Series)

Tier 1

Tier 2

300,000

Outstanding size (THB Mil.)

9183 %% 250,000

0

16%8%

50

1%

100

5

Tier 2: 50,000 – 100,000MB

200,000

(16 Series)

LBA 25

150,000

50

ILB

15

15

100,000 100,000

BS 30 10

LB267A LB24DA LB14DA LB175A LB25DA LB25DA LB316A LB171A LB214A LB19DA LB157A LB244A LB22NA LB183A LB406A LB396A LB383A

LB416A LB183B ILB283A ILB283A LB155A LB155A LB17OA LB27DA LB193A LB213A LB326A LB191A LB283A LB446A LB446A LB16NA LB198A LB167A LB233A

0

LB196A LB176A LB21DA LB21DA LB236A LBA37DA LBA37DA LB616A LB616A LB15DA LB296A LB296A ILB217A

50,000

FY 2015 on-the-run Benchmark Bond FY 2015 on-the-run Innovative Bond Bond Switching : Source Bond

Source : ThaiBMA

The outstanding size of loan bond maturing in the next 5 years

Well-Distributed Bond Maturity Profile

is 1,377,109 THB Mil. (43% of Total GOVT Bond)

(End of November 2014)

Public Debt Management Office, Ministry of Finance, Kingdom of Thailand

THB Mil. 350,000

Current Outstanding Current Outstanding Current Outstanding

≥ THB 100 Bil. = THB 50-100 Bil. ≤ THB 50 Bil.

FY 2014 on-the-run Benchmark Bond

300,000

FY 2014 on-the-run Innovative Bond Bond Switching : Source Bond

250,000

5 200,000

LBA 25

150,000

100,000 100,000

ILB

50

15

15

BS

30

34

1 Source : ThaiBMA

2

3

4

5

6 – 10 years

11 – 50 years

LB616A LB616A

LB267A LB27DA ILB283A ILB283A LB283A LB296A LB296A LB316A LB326A LBA37DA LBA37DA LB383A LB396A LB406A LB416A LB446A LB446A

LB24DA

LB19DA LB213A LB214A ILB217A LB21DA LB21DA LB22NA LB233A LB236A LB244A

LB14DA LB155A LB155A LB157A LB15DA LB167A LB16NA LB171A LB175A LB176A LB17OA LB183A LB183B LB191A LB193A LB196A LB198A

TTM -

LB25DA LB25DA

10

50,000

 Average-Time-to-Maturity (ATM) = 9.1 yrs  Average Cost = 4.00%  Fixed : Floating = 87 : 13 As of Oct 2014

Total Domestic GOVT Debt = 3.88* THB Trillion * Excluding 75,476 THB Mil. of Foreign Debt

Public Debt Management Office, Ministry of Finance, Kingdom of Thailand

Assumptions : 6 months BIBOR = 2.29%, 6 months Fixed Deposit Rate = 1.41%, Inflation = 1.48%

FIDF 1

   

FIDF 3

300,000

GOVT Debt (for FIDF) = 1,073,848 THB Mil.

128000

Maturity Profile

63%

32% 5%

0

10 yrs + 0

0

0

6-10 yrs 0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

35000 14000

Next 5 yrs

0

0

0

71000

69000 0

37900 0

40000

25000 90418.11

67537.23

141962.51

25,000 101800

0

39836

100,000

58440 27104.62

126850

200,000

= 4yrs 6mths = 3.97% = 83: 17 = 15%

ATM Avg. Cost Fixed : Floating Callable

TTM Fiscal Year

T-Bill

TKK

On-lending Loan

Water Decree

Maturity Profile

37%

17% 10 yrs +

13,000

6-10 yrs

135,114

27,800

29,800

40,000

95,936

20,000

5,500

107,000

6,500

33,581

41,900

2,200

35,000

24,700 101,512

212,360

47,000

43,000

50,664

79,850

184,110

11,836

360,484

4,750

136,739

135,665

164,297

268,022

= 10yrs 9mths = 4.00% = 88: 12 = 7%

46%

Next 5 yrs

18,900

100,000

0

ATM Avg. Cost Fixed : Floating Callable

20,000

200,000

   

GOVT Direct Debt (exclude FIDF) = 2,804,492** THB Mil. 16,000 12,693

939 60,000

86,630

300,000

24,757 10,000

22,000

Budget Deficit

TTM Fiscal Year

ebt

(1) (2) (3) (4)

Well-Developed Bond Market Improved

GOV’T Direct Debt Profile Dramatically

ATM Lengthened Cost Lowered Well-Balanced Fixed-Float Ratio Well-Distributed Maturity Profile

PublicDebt DebtManagement ManagementOffice, Office,Ministry Ministryof ofFinance, Finance,Kingdom Kingdomof ofThailand Thailand Public

Note : Government Direct Debt = 2.80 THB Million (exclude FIDF)

As of Dec 2007

ATM

Average-Time-to-Maturity LENGTHENED by 5 yrs

Avg. Cost LOWERED by 50 bps.

As of October 2014

10yrs 9mths ATM

5yrs 3mths

Avg. cost

4.5%

(While ATM Lengthened by 5 yrs)

Avg. cost

4.0% Floating

Well-Balanced Fixed/Floating Ratio (Target : Fixed/Float ratio = 80 : 20)

%

10%

Floating

Fixed

Fixed

90%

88%

12%

54% 46%

Well-Distributed Maturity Profile

28%

(Maturing Debt in the next 5 yrs is less than 50% of Total Debt) next 5 yrs year 6 -10

18% 10 yrs +

17% next 5 yrs year 6 -10

37%

10 yrs +

35

A B

FY 2014 GOVT Bond Auction Results Classified by Tenor

ALL Benchmark Bond : Fully Allocated 30-to-50-yr Benchmark Bond : Avg.Accepted LOWER than Market Price Public Debt Management Office, Ministry of Finance

Million Baht

10yr

5yr

Bps 15

Benchmark Bond 15 – 50yr

Benchmark Bond 5 – 10yr

100,000

15yr

30yr

50yr

(Exclusivity)

A

57,619 48,515

50,000

42,320

Fully Allocated

39,017

37,490 34,422 31,275

10

32,126

5

27,554 21,070 15,897

16,942

3.2

2.7

T-1= -0

1.8

20,000 20,000 20,000 20,000 20,000 20,000

3.9

15,052 10,286

3.2

2.9 13,000 12,000 16,000 16,000 15,000

-1.2

0.2 -0.8

10,000

10,000 7,000

10,000

6,534

21,05322,425 20,119 18,525 18,435

10,000

9,000

19,540 14,110

12,473

2.3

3,466

-0.2

-0.4

17,885

5,000

9,000

9,000

9,000

309

13,982 10,080 12,000

8,000

5,000

8,000

9,000

9,000

8,691

3,754 7,246

0

-2.2

-0.2

B

-2.4 -3.7

-4.1

-3.2

-2.3

-2.8

-3.4

-5

-6.1

-50,000

-7.0 -7.8 -8.9

-8.1

-8.3

-10 -9.6

Short-term Benchmark Bond (<10 yrs) Long-term Benchmark Bond (>10 yrs) Not Fully Allocated or Subscribed Average Accepted Yield

-11.4

-100,000

-15 -15.0

o n R e s u l t s B e l o w T h e FY2014A u c t i T-Bill Auction Result

M ar kLow e t Cost P r of i cFunding e

 High Volume of Short-term Demand Public Debt Management Office, Ministry of Finance

Million Baht

Basis Points T-bill (Allocated Amount) R-Bill (Allocated Amount) Participated Amount (Excess Demand) Not Fully Allocated Spread [AAY-Yield(T-1)]

T-1= 0

36

Keep our word… to get investors confidence for the plan 1,250,000

Unit : Million Baht Lower-than-expected disbursement of Water Decree

Lower-than-expected disbursement of Water Decree

1,000,000 Delay of Infrastructure Investment Plan

Economic Recovery

750,000

756,xxx MB

Higher-than-expected revenue collection

Stimulus package to ease: US financial crisis

-6%

500,000

99% 0% 250,000

0

+5%

-3%

(end of Sep,14)

+2%

Plan Actual

Plan Actual

Plan Actual

Plan Actual

Plan: Actual:

Announced Government’s funding need at PDMO’s Annual Market Dialogues in September Actual fund raising at the end of fiscal year (calculated from announced auction)

--------------

The difference between ‘’the announced’’ and ‘’the actual’’ supply of benchmark bond (% share)

Plan

Actual

Plan Actual

Benchmark Instruments are Benchmark Bonds : Standard Loan Bond (LB) tenors 5-10-15-30-50yr (in FY 2014) + Innovative Products : Inflation-linked Bond (ILB) + Amortized Bond (LBA) Regular issuance/ Consultation with PDs/ Pre-announced auction table

Other Instruments : Saving Bond, Floating Rate Bond, Promissory Notes, Bills and Bank Loan

37

2014

Net Change in Non-resident Holding BOT Bond vs GOVT Bond

Weekly Accumulate

As o

THB Mil. 100,000

T

+80,152 75,000

50,000

+23,433

25,000

GOVT Bond

+29,642THB Mil

.

(30th

Dec 2014)

0 0

-25,000

-36,164 -50,000

BOT Bond

- 53,807THB Mil

-57,427

.

(30th

-75,000

Dec 2014)

WK1 WK2 WK3 WK4 WK5 WK6 WK7 WK8 WK9 WK10 WK11 WK12 WK13 WK14 WK15 WK16 WK17 WK18 WK19 WK20 WK21 WK22 WK23 WK24 WK25 WK26 WK27 WK28 WK29 WK30 WK31 WK32 WK33 WK34 WK35 WK36 WK37 WK38 WK39 WK40 WK41 WK42 WK43 WK44 WK45 WK46 WK47 WK48 WK49 WK50 WK51 WK52 WK53

-100,000

As of 30th Dec ,2014

January 2014

Annual Net Capital Flows indicates strong confidence in GOVT Bonds

GOVT Bond +29,642 THB Mil. (2014YTD)

THB Mil.

350,000

300,000

250,000

+93,249

200,000

.

BOT

BOT +84,003

150,000 +23,052

100,000

+129,454

50,000

0

0

-50,000

+30,216 -22,494

-2,793

+196,463

GOVT

GOVT

-1,598

THB Mil.

-7,506

THB Mil.

+117,144

+96,738 +29,642

-53,807

-27,157 -100,506

-100,000

-150,000

38

2007

2008

2009

Non-resident Net Buy/Sell in BOT Bond Non-resident Net Buy/Sell in GOVT Bond

2010

2011

2012

2013

2014

As of 30th Dec, 2014

2014

Non-Resident Holding in THB Bond = 683,215 THB Mil.

Outstanding

Thai Bond Market Cap. =9,287,288 THB Mil.

Baht Bond

1%

(Foreign Issuers Bond)

CGIF Market Initiative) 0.03% (For Asian Bond

GOVT Bond GOVT Bond

574,063 625,483

BOT Bond Bond BOT

118,177 56,980

SOE Bond Bond SOE

0-

Corp Bond Corp Bond

24%

SOEs Bond

9%

683,215

GOVT Bond Outstanding 3,452,687

30%

7.53% 7.36%

692,906

BOT Bond Outstanding 2,742,756

THB Mil.

Non-Resident 625,483 THB Mil.

BOT Bond

6.24% 6.74% 1.390% 1.28% 0.61% 1.28 0.00% 0.01 0.01% 0.01%

752 666

TOTAL TOTAL

Corp Bond

% of Thai Thai Bond Bond Market Market Cap. % Share of (9,202,573 THB Million)

Non-Res i dent Hol di ng Non-Resident Holding (THB Mi l l i on) (THB Million)

Issuer Issuer

THB Mil.

Non-Resident 56,980 THB Mil. %

%

2,742,756 THB Mil. GOVT Bond

Domestic Investors

Domestic Investors

36%

2,685,776 THB Mil.

2,827,204 THB Mil.

97.9

81.9

%

%

3,452,687 THB Mil.

As of 30th Dec, 2014

Peers Comparison

Non-Resident Holding in Thai GOVT Bond is 683,215 THB Mil. or 18.1% of Total GOVT Bond Outstanding Relatively “moderate” share of NR holding by region average

40%

Indonesia

Percentage share of Non-resident Holding in Local Government Bond (Mar 2008 - Present)

37.3% Sep’ 14

Malaysia 32.03%

30%

Jun’ 14

Thailand

Peak @ 19.1% (Apr’ 13)

18.1%

20%

As of 30th Dec,14

Korea 10.55% Jun’14

10%

Japan 8.54% Jun’ 14

1.5%

2008 Source : AsianBondsOnline, ThaiBMA

2009

2010

2011

2012

2013

Dec-14

Jun-57

Nov-14

Mar-57

Dec-56

Sep-56

Jun-56

Mar-56

Dec-55

Sep-55

Jun-55

Mar-55

Dec-54

Sep-54

Jun-54

Mar-54

Dec-53

Sep-53

Jun-53

Mar-53

Dec-52

Sep-52

Jun-52

Mar-52

Dec-51

Sep-51

Jun-51

Mar-51

0%

Oct-14

(27,474 THB Mil.)

2014 As of 30th Dec, 2014

39

Source: Public Sector Development Group, PDMO

Pro-active Debt Management

Develop Domestic Bond Market to be a Sustainable Source of Funding for the Stability of Thailandâ&#x20AC;&#x2122;s Financial System

Foster Strong and Effective Organization

3 PDMOâ&#x20AC;&#x2122;s Strategies

Formulate sound public debt management policies and strategies as well as conduct, monitor and evaluate public debt management operations under the relevant legal framework and guidelines

Mission

Transparency, Discipline, Trustworthiness, Driving Social and Economic Development

Values

Professional in public debt management for sustainable development

Vision

For Further Information : Pimpen Ladpli

pimpen@pdmo.go.th

Senior Expert on Bond Market Development Acting Executive Director of Bond Market Development Bureau

Nattakarn Boonsri

nattakarn@pdmo.go.th

Director of Government Bond Market Development Division

Sophida Sritomya

sophida@pdmo.go.th

Director of Financial Product Development Division

Paroche Hutachareon

paroche@pdmo.go.th

Acting Director of Fund Management and Bond Market Infrastructure Development Division

Nakarin Prompat

nakarin@pdmo.go.th

Acting Director of International Bond Market Policy Division http://www.pdmo.go.th

Tel. +66 2271 7999 , +66 2265 8050