Gauge the pulse of debt instruments & bond funds in the COVID-19 era

New Normal and investor behavior

            This year, investors should learn from real experience that What is "risky investment"? Plus it's a risk in many dimensions. It's not just about price fluctuations or profits and losses. But there are still liquidity issues, such as closing bond funds. And there are also physical problems. For example, the price of West Texas Intermediate crude oil is negative because of concerns about oil storage. When encountering new experiences that comes strong and fast It is believed that this will help investors be more careful. Find more in-depth information. This is the New Normal in terms of investing.

            As for New Normal in terms of living life It is believed that Thai people already have the ability to adapt well. But we probably don't need to try to predict too much ahead. Because the situation is still highly uncertain. But you may follow various changes. closer and gradually adjust and look for investment opportunities Work and business that will gradually be revealed

            And must not forget that changes in this world There has been continuous development since the past, which "past" does not mean just the last 20-30 years, but may go back hundreds or even thousands of years. which will be seen that Basic human behavior and basic needs remain the same. hasn't changed The format may change depending on the era and technology. But the content remains the same. If we look back to a more comprehensive past, We may see repeating patterns or cycles.

Direction of debt instruments and debt funds from the COVID-19 situation

            Before talking about the COVID-19 situation Let me briefly review the basic principles of debt instruments first.

            First point Bond prices and market interest rates are inversely related to each other. If we are talking about debt instruments that are already in the market. If market interest rates increase Bond prices will fall. and vice versa If market interest rates decrease Bond prices will increase.

            Number two Debt instruments that have other characteristics are the same, differing only in the interest rate on the face of the note. The one that has a lower interest rate on the face of the ticket. If market interest rates change It will have a more volatile price.

            Third point Debt instruments with longer remaining maturities There will be higher volatility due to changes in market interest rates.

            As for the debt instrument situation in the past Please update to know first. After entering the second quarter onwards, the market situation has become much more stable. But if talking about investment in financial assets as a whole In the middle to the end of the first quarter of this year, there was very high volatility.

            which in general If risky assets such as stocks Fluctuation occurs Debt instruments are often reliable for their stability. The word stable does not mean that market interest rates do not move. But it will move gradually. Bond prices which are related to market interest rates So it's not very volatile. But in this situation Interest rates in the market for debt securities fluctuate up and down with stocks, crude oil, and gold. On some days, the market seems to return to a very positive position. But another day passed and it got worse again. This behavior was seen many times at the end of the first quarter.

            And when what was once believed to be reliable It turns out to fluctuate with other assets. Therefore affecting investors who want certainty. resulting in higher sales pressure

            In addition, it can be seen that at the end of 2562, there was still no COVID-19 situation. Interest rates in the bond market are already low. For example, the 5-year US government bond at the beginning of 2562 had a return of 2.5% per year and at the end of the year dropped to about 1.7% per year. But in March 2563 it appeared that It fell to 0.4% per year and then rose to 0.8% per year in just a little over a week.

            As for the Thai bond market, for example, 5-year Thai government bonds at the beginning of 2562 gave a return of 2.08% per year, and at the end of the year it dropped back down to 1.26% per year, but then in March 2563 it dropped even lower to 0.68. % per year before running back up to the level of 1.41% per year in just a few weeks.

            Looking at the numbers, it doesn't seem like a lot. But in the debt instrument industry This characteristic is considered very volatile. and in a situation where the face interest rate on debt instruments has been low since the beginning. Such turbulence makes bond prices fluctuate even more.

            However, in the midst of such fluctuations The Bank of Thailand has also stepped in. Since reducing the policy interest rate to 0.5% per year, along with joining hands with the SEC office to make a statement to build confidence in the market. Until later it became the BSF fund, which made the overall debt instrument situation since the end of March 2563 much more stable.

            However, investors must realize that We are living in an era of low interest rates. There is a chance that it will be lower than this, but in the next period. There is also a chance that interest rates will increase. Investors should be more careful about this factor in the future.

Confidence - investment attractiveness in debt instruments and bond funds

            Investment principles remain the same and have not changed. That is, if you look at the price fluctuations of debt instruments and debt funds, they still fluctuate less than stocks and stock funds. It can also answer the needs of investors who want certainty. But must not forget that Investments are risky. Especially in situations where the economic situation is affected by COVID-19.

Most recently, the NESDB just announced that the GDP number for the 1st quarter of 2563 was negative 1.8%, which is the biggest negative in 8 years. It further reflects that The performance of some bond issuers has also been affected. which if affected up to a certain level It may be downgraded in reliability level. Which will eventually come back to affect the price of that debt instrument.

            Therefore, investors should follow the news more closely. And you must not forget the principle of diversifying your assets according to the level of risk that is appropriate for you. But most importantly, you must invest in accordance with your own financial goals.

Guidelines for selecting debt instruments and debt funds that are interesting and safe

            First, you need to understand the main types of risks from investing in debt instruments.

            First point Market or price risk is the chance that instrument prices will increase or decrease according to market conditions.

            Number two Trust risk or the chance that the issuer of the debt instrument will default on the debt.

            Third point Liquidity risk It is an opportunity for investors to sell debt instruments slowly. Or if you have to sell in a hurry, it will sell at a bad price. Because there is little trading volume in the market or there is a wide spread between the bid and offer prices.

            If it is recommended that How should I choose debt instruments? You must first understand the current interest rate situation. whether it is at a high or low level and is in an upward or downward trend These two matters are important factors in considering which type of debt instrument you should invest in. Or sometimes it can be used to make decisions as well. Should I invest in debt instruments during this period or not?

            which will be seen that We currently live in an era of low interest rates. and the interest rate trend is in the downtrend In the downward trend of interest rates We will also see the details. Interest rates have been falling for a long time and have fallen deep. Even if you can go down again Or it may even go into the negative like in other countries. But there probably isn't as much space to go down as there is already.

            During a period when interest rates are still falling Investors may still be able to hold debt instruments or debt instruments funds that have a long remaining maturity, such as 2-3 years, or maybe up to 5 years, but if interest rates begin to decrease in the future, May consider reducing price risk. By shifting to holding debt instruments or debt funds with a shorter remaining maturity, such as no more than 1 year.

            In order to know which bond funds are held What is the average remaining maturity of debt instruments in the fund? You can check it in the monthly Fund Fact Sheet, which will be clearly stated. You should also check the monthly investment report. What debt instruments are held in the fund? In order to consider the main debt instruments whether the latest credit rating has changed or not

            As for investors holding individual debt instruments You must regularly check the company's financial statements. and read the latest reports from credit rating companies In order to know whether there has been a change in the view of the debt instruments we hold or not.

            This part is to emphasize that Investors these days need to do their homework more carefully. You can no longer buy and hold and forget. which if investors do their homework regularly There will be less risk.

Investment perspective for the second half of the year

          So far, there are two key points that need to be pursued.

          First point COVID-19 situation When will there be complete peace? This depends on We will find a vaccine or cure for COVID-19. How quickly is it truly effective? From what I have read from various sources, it is found that this matter will take several more quarters of time. You may have to wait until 2564 because the drug will be released for widespread use. It will take time to test to be sure.

          Number two COVID-19 situation As much as it has happened It will affect the overall economy and the operating results of companies. How much? In the future we should see more real numbers. As we have already seen the Thai GDP numbers for the 1st quarter of 2563, if we continue to see the numbers for the 2nd quarter of 2563, it should be clearer how much time it will take to recover to the original level.

            Including financial statements for the 1st quarter of 2563 of listed companies. It's been revealed. Even though there are some companies that request to postpone the submission of financial statements. But most will see that the operating results have weakened somewhat. Especially businesses that are directly affected, such as airlines and hotels.

            Therefore, in the second half of the year It should be a matter of following and watching the actual economic numbers. How much worse or less than expected will it be? If it's worse than expected There is an opportunity for various investment assets to will recover faster Anyone who bought it at the right time There is a chance to make a good profit.