Sovereigns and central banks

Thailand prices new government SLB

Written by Jonas David

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The Kingdom of Thailand has priced its new Sustainability-Linked Bond (SLB), with May 2042 maturity and a 2.86% coupon. Final pricing was broadly in line with the government curve on the day, amid global upward pressure on government bond yields, and the THB 25bn issued was higher than previously indicated (THB 15bn).

This is the first sovereign SLB globally tied to 2035 NDC targets, and only the second to embed the 30x30 biodiversity target.

Both targets require a departure from historical trends. Net GHG emissions would need to fall to 152 MtCO2e by 2035, a 47% reduction from 2019 levels, while protected land areas and OECMs would need to reach 30% by 2030, up from 18.44% in 2024. We use illustrative probabilities of 20% and 40%, respectively, of achieving them.

However, ambitious targets do not automatically make an ambitious SLB. With coupon steps of just +/-0.025% p.a. for each target, the signalling value appears greater than the option value for investors. Differing observation dates and reporting time lags also give the nature target the greater structural weight.

Our option pricing analysis suggests a small positive option value, but it appears too small to be material to pricing. More meaningful steps, and/or longer periods they would apply, would improve the structure’s financial materiality.

About the author

Jonas David

Jonas David

Research Director

Based in London, Jonas researches the role of fixed income markets in the climate transition, focusing on key sectors, sovereigns and development finance. He previously worked in emerging markets fixed income at Morgan Stanley Investment Management and UBS.

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