Major political parties are promising higher spending on social welfare and for boosting short-term consumption in their campaigns for the February 8 general election, but revealing no credible plans for increasing revenue or reducing the persistent budget deficit.
Decades of budget deficits have swelled public debt to around 12.4 trillion baht, making up 65.7 per cent of gross domestic product (GDP). The widely accepted public debt threshold in Thailand is 70 per cent of GDP.
The budget deficit currently has risen to around 4–5 per cent of GDP, which is regarded as high and worrisome by most experts.
The rising public debt and the consequent need of the government to raise funds has emerged as an alternative investment opportunity for individual Thais who could not make a profit from the local stock market. The sluggish SET Index dropped 10 per cent year on year in 2025.
“The total return on investment of government bonds and corporate bonds was 5-8 per cent last year, compared to the stock market’s total return index of minus 4.6 per cent,” says Somjin Sornpaisarn, president of the Thai Bond Market Association (ThaiBMA).
Bonds scores over stocks
As of the end of 2025, the outstanding value of the Thai bond market had reached 17.91 trillion baht, representing 96 per cent of GDP and marking a 4.67 per cent increase over the previous year.
Its total value has surpassed the 15.9 trillion baht market cap of the local equity market.
The next government is also expected to run a fiscal deficit throughout its four-year term due to declining government revenue. Under the midterm fiscal plan proposed by the Finance Ministry, the budget deficit would reduce to 3 per cent of GDP by 2029.
Until then, the government would have to keep issuing bonds to plug the deficit.
Ironically while public debt remains high, government bonds would be a relatively default-risk free alternative for individual investors.
Somjin is optimistic that the local market has ample liquidity to absorb both government and corporate bonds going forward. In essence, the next government would still be able to manage the public debt as it could rely heavily on local funds.
“Investors, especially seniors, should invest more in bonds than equity. They should diversify their portfolios to include various asset classes—equity and bonds,” Somjin suggests.
Foreign currency debt was only a small fraction of total public debt, at 0.8 per cent as of November 30, 2025, according to the Public Debt Management Office.
Meanwhile, the International Monetary Fund recently suggested that “available fiscal resources should be directed towards growth-enhancing activities, remain well-targeted, and be efficiently implemented to maximize impact.
In the absence of severe downside shocks, the authorities should avoid further delaying fiscal adjustment or raising the debt ceiling and instead proceed with growth-friendly, revenue-driven consolidation to contain debt accumulation and create fiscal space for rising spending needs to invest in human and physical capital and strengthen social protection”.
The state of Thailand’s bond market in 2025
The Thai economy in 2025 expanded lower than expected, primarily due to external factors such as global uncertainty and trade wars, as well as internal impediments including high household debt and weak private sector investment.
These factors led to a 3.51 per cent decrease in corporate bond issuance compared to the previous year.
The overall Thai bond market, however, grew by 4.67 per cent year on year, driven mainly by an increase in the issuance of government bonds, according to Somjin who highlighted the following key points:
• The Thai bond market grew 4.67 per cent
At the end of 2025, the outstanding value of Thai bonds stood at 17.91 trillion baht (equivalent to 96 per cent of GDP), up 4.67 per cent from the previous year.
This was mainly driven by an increase in government bonds, while outstanding corporate bonds declined slightly for the second consecutive year.
• Long‑term corporate bond issuance fell 3.51 per cent
In 2025, long‑term corporate bond issuance totaled 881.1 billion baht, down 3.51 per cent compared with the previous year as both investment‑grade (IG) and high‑yield (HY) issues saw declines.
However, IG bond issues exceeded those maturing, with longer average tenors and higher average issue sizes. In contrast, HY issues were less than the amounts maturing, with shorter average tenors and smaller average issuance sizes.
The three sectors with the highest issuance were energy, finance and property in that order.
All long‑term corporate bonds issued in 2025 and offered to the general public exceeded the amounts of the previous year.
• ESG bond issuance rose 18.18 per cent
In 2025 a total of 208.4 billion baht was raised through the issue of ESG bonds, an increase of 18.18 per cent year‑on‑year, driven by increased issuance by the government, which remains the leading ESG bond issuer.
“Return on investment on ESG government bonds was highest at 8.2 per cent last year,” says Somjin.
In 2025, the government shifted mainly to issuing Sustainability‑Linked Bonds (SLB) instead of Sustainability Bonds.
The private sector also increased SLB issuance.
By the end of 2025, total outstanding ESG bonds stood at 978.4 billion baht, representing 5.46 per cent of the total outstanding Thai bond market.
• Foreign investors were net buyers of Thai bonds in 2025
In Q1, Q2 and Q4, foreign investors were net buyers at 75.7 billion baht, offset by net selling of 3.3 billion baht in Q3.
As a result, at the end of 2025 foreign investors held 918 billion baht of Thai bonds, accounting for 5.12 per cent of the total outstanding. The average remaining maturity of Thai bonds held by foreigners was 8.09 years, down from 8.66 years at the end of 2024.
• Thai government bond yield curve shifted lower
In 2025, Thai government bond yields declined across the curve. Short‑term yields fell faster than long‑term yields in a “bull steepening” pattern, with short‑term yields moving down in line with the policy rate, while long‑term yields fell less, likely reflecting concerns over high public debt or bond supply.
As a result, two‑, five‑ and 10‑year Thai government bond yields fell by 89, 81, and 65 basis points (bps) from 2024, ending 2025 at 1.13 per cent, 1.28 per cent and 1.66 per cent, respectively.
• Corporate bond yield curve also declined, in line with government bonds
In 2025, yields on five‑year AAA corporate bonds fell by 100 bps, more than government bonds and AA, A, and BBB+ corporate bonds, which declined by 75–89 bps.
By the end of 2025, five‑year corporate bond yields were at 1.81 per cent (AAA), 2.10 per cent (AA), 2.53 per cent (A), and 3.78 per cent (BBB+).
• Policy rate in 2026 likely to be cut once
Survey results show most market participants expect the Monetary Policy Committee to cut the policy rate by 25 bps in Q2, bringing it down to 1 per cent from the current 1.25 per cent.
Five‑year and 10‑year government bond yields in 2026 are expected to edge down by about 5–10 bps on average from 2025.
The main drivers cited are the government’s funding plans, Thailand’s economic growth, the direction of the domestic policy rate and foreign capital flows.
“As some companies may default on their corporate bonds, investors should be selective in their choice of debt instrument,” Ariya Tiranaprakij, executive vice-president of ThaiBMA, cautions.
