Bonds set for biggest weekly loss

Thailand's five-year bonds headed for the biggest weekly drop since May, pushing the yield to the highest in more than three months, after the central bank predicted an economic pickup.

The yield on the governments 3.875% bonds due June 2019 jumped seven basis points, or 0.07 percentage point, from June 27 to 3.22%t as of 9.48am, according to data compiled by Bloomberg. That's the highest level since March 26. The rate was little changed today.

Southeast Asia's second-biggest economy will have a V- shaped recovery in the second half as political tension eases, Bank of Thailand governor Prasarn Trairatvorakul said on Thursday. Increased government spending and domestic consumption will help boost growth, he said, tempering bets the central bank will ease policy to spur expansion.

"The improving economic outlook has eliminated speculation of a possible rate reduction and strengthened the view for possible tighter monetary policy in 2015,'' Komsorn Prakobphol, senior investment strategist at Tisco Financial Group, said by phone.

The baht strengthened 0.2% since June 27 to 32.393 per dollar, set for a second weekly advance, according to data compiled by Bloomberg. It was little changed on Friday.

One-month implied volatility in the baht, a measure of expected exchange-rate moves used to price options, climbed three basis points to 4.51% on Friday. It dropped eight basis points for the week.

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