Corporate spreads narrow

       Investors in Thailand are losing their appetite for corporate bonds because of steadily narrowing spreads over government debt, but companies are still likely to issue a record amount this year.
       Fund managers said new corporate issues were being aimed at retail investors, who were interested in absolute returns, rather than institutional investors looking to trade in the secondary market.
       "The outlook for corporate debt is still the same - top-tier debt and shortterm corporate debt spreads will narrow in coming weeks," said Arsa Indaravijava,head of fixed income at Ayudhya Fund Asset Management."But lately, shortdated government bonds, such as treasury bills, are drawing more buying interest as yields there keep moving up."
       One-month treasury bills auctioned on Monday yielded 1.13%, up eight basis points from a month before, while the three-month bill yield rose 6.3 points and six-month yields climbed 10 points.
       "It's better to go after government than corporate bonds, which are now offering tiny returns. For example, a good name like PTTEP is now offering spreads of 15 basis points.... That doesn't make sense," one fund manager said.
       Spreads between Thai corporate and government bond yields have tightened over the past three months, with toprated maturities narrowing to perhaps 30 basis points at most.
       Daily trading volume in corporate bonds was 420 million baht on Tuesday,down from 479 million on average in October and 490 million in September,according to Thai Bond Market Association data.
       Among companies planning bond issues this month are Charoen Pokphand Foods (CPF), which could sell 8 billion baht, and Thanachart Capital (TCAP),which could offer up to 9 billion baht IN five-year bonds.
       Fund managers probably won't be rushing to buy.
       "The coupons on recent new bonds don't give much incentive. CPF's bonds,for instance, are offering spreads of only 40-50 basis points for 4- and 5-year issues," a fund manager said.