ASIA LOCAL BONDS-Thai bond yields rise as foreigners sell

By Saikat Chatterjee

HONG KONG, Nov 2 (Reuters) - Thai federal bond yields resumed their upward march on Monday as foreign funds took profits but benign inflation data helped contain losses.

FOREIGNERS DUMP THAI BONDS

Thai 10-year bond yields TH10YT=RR rose 7 basis points to 4.50 percent, up 140 basis points from the low of 3.10 percent in end-April.

Dealers attributed the rise in yields to foreign fund selling and latest data from the Thai bond dealers association showed foreign investors sold 3.5 billion baht ($104.7 million) worth of bonds on Friday.

"Even though inflation data has come within market consensus, foreign fund flows will be a key factor that will dog the bond market for the remainder of 2009," said a Bangkok-based trader.

Thai consumer prices rose 0.4 percent in October, less than 0.6 percent forecast in a Reuters poll and economists expect no increase in official interest rates until some way into 2010. [ID:nBKK484248]

Spreads between 1-year Thai swap rates THBSB6TH1Y= and six-month overnight floating rates THB6MFIX=TH have fallen to 40 basis points from 47 basis points in mid-October as investors pared back rate rise expectations.

INDONESIAN BOND YIELDS STEADY

In Indonesia, bonds yields stabilised after rising in early deals following a weakening rupiah IDR= as stocks recovered to end the day with marginal gains and with benign inflation also helping lift sentiment.

Five-year bond yields ID5YT=RR were off highs finishing at 9.50 percent, unchanged from Friday's close, after rising to as much as 9.55 percent in early trade.

But benign inflation data triggered some bargain buying in late deals. Consumer prices rose 0.19 percent in October, below market forecasts of a 0.44 percent rise. [ID:nJKB003241].

"The inflation numbers have seen the offers inching higher and the bids becoming firmer but it hasn't been a high volume day and next week's auction may provide some triggers," said a Jakarta-based trader.

The finance ministry may hold its next auction for Islamic-compliant debt on Nov. 10 with a tentative target of raising 1.5 trillion rupiah ($156 million). [ID:nJAK545441].

Latest data showed that even though foreigners have been net sellers of 330 billion rupiah ($35 million) last week, they bought a net 8.2 trillion in October, the single-biggest monthly purchases by offshore buyers of debt in 2009. ($1=9,570 rupiah, 33.42 baht) (Editing by Tomasz Janowski)