The corporate bond market faces a critical test this year, as heightened refinancing risks amid a slowing economy and escalating geopolitical tensions threaten roughly 687 billion baht in bonds set to mature over the remaining three quarters, according to the Thai Bond Market Association (ThaiBMA).
Investment-grade bonds account for around 92% of upcoming maturities, but market attention has shifted to lower-quality debt, particularly non-rated bonds and those with ratings of BB- and below, altogether worth more than 53 billion baht.
This group is seen as the most vulnerable segment under tightening financial conditions, the association said.
Credit stress already surfaced in the first quarter, with bond defaults from four issuers totalling 8.98 billion baht, largely concentrated among non-rated firms. The net default value was 4.35 billion baht, reflecting persistent liquidity constraints.
Meanwhile, debt restructuring cases from three issuers reached 5.05 billion baht, although the net restructured value remained relatively limited at 422 million baht. The trend highlights a growing preference among distressed issuers to renegotiate terms rather than default outright, ThaiBMA noted.
Bond redemptions are heavily concentrated in the middle of the year, with second-quarter maturities peaking at 266 billion baht, followed by 245 billion baht in the third quarter.
This clustering could intensify liquidity pressures, particularly for weaker issuers facing refinancing challenges, the association said. By sector, the financial industry leads with 136 billion baht in maturing bonds, followed by energy at 121 billion baht and property at 98.2 billion.
Property developers under pressure from weak demand and tight credit remain a key area of concern, according to ThaiBMA.
"Rising geopolitical tensions and inflationary pressures are increasing default risks among corporate issuers," said Ariya Tiranaprakij, executive vice-president of the association.
Debt restructuring is becoming more common than outright defaults, as companies seek to preserve liquidity and continue operations, she said.
"Restructuring is not necessarily the end," said Ms Ariya, adding that many firms are able to resume repayments under revised terms, although the risk of repeated disruptions remains.
Most defaults stem from issuers facing prolonged liquidity strain over the past 2-3 years, leaving them unable to repay large principal amounts at maturity, she said. In many cases, these firms subsequently transition into restructuring after securing bondholder approval.
External pressures, including war-driven energy price spikes, inflation, and volatile bond yields, are further complicating funding conditions. Rising yields have increased borrowing costs, forcing some companies to delay bond issuance to avoid locking in high interest expenses.
MARKET OUTLOOK
Somjin Sornpaisarn, president of ThaiBMA, said geopolitical uncertainty led some issuers to postpone fundraising. The association still maintains its 2026 corporate bond issuance forecast at 880-900 billion baht, with improvement expected in the second half.
The bond market continued to expand modestly in the first three months, rising 1.7% to 18.2 trillion baht, equivalent to 96% of GDP, driven primarily by government bonds. Corporate bonds remained stable at around 4.5 trillion baht, while foreign investors recorded net inflows of 19.6 billion baht.
Market participants expect the Bank of Thailand to hold its policy rate at 1% throughout 2026, while 5- and 10-year bond yields are projected to rise by around 5 basis points, reflecting inflation trends and geopolitical risks, he said.
Despite the dominance of high- quality bonds, risks remain concentrated in the lower-rated segment, said Mr Somjin.
"In an environment marked by economic slowdown and global conflict, investors are expected to remain selective, favouring stronger credit while monitoring developments in high-yield and unrated bonds as a key indicator of stress in Thailand's corporate debt market," he said.
