The market for long-term corporate bonds has experienced a contraction, with issuance valued at 337 billion baht between January and May 2026, marking a 3.7% decrease compared to the same period last year. This slowdown appears to be a direct consequence of heightened investor caution.
Investor Hesitation Drives Market Shift
Recent high-profile bond defaults, ongoing global geopolitical uncertainties, and sluggish domestic economic growth have collectively contributed to a more risk-averse sentiment among investors. Furthermore, elevated bond market yields have influenced decision-making, prompting companies to adopt a more conservative stance on fundraising strategies.
The current issuance landscape is heavily skewed towards investment-grade bonds, defined as securities with a rating of BBB- or higher. These financially robust instruments accounted for approximately 95% of total issuance, totaling 321 billion baht.
Despite this subdued start to the year, projections suggest the full-year corporate bond issuance for 2026 could reach between 850 and 890 billion baht. This is expected to align with last year’s figures and remains close to earlier forecasts.
“Corporate borrowers are expected to remain active in refinancing maturing debt and securing working capital, although volatility in bond yields will continue to influence issuance decisions,” noted an analysis of market trends.
Default Risk Concerns Dominate High-Yield Segment
Market data indicates that investor apprehension is largely concentrated within the high-risk segment of the bond market, rather than posing a systemic threat to the entire market. Demand for investment-grade bonds remains robust, with subscription success rates consistently exceeding 96% of the offered value. This reflects a clear investor preference for issuers demonstrating strong financial standing and reliable repayment capabilities.
In stark contrast, high-yield bonds, encompassing those rated BB+ or below as well as non-rated securities, continue to face considerable hurdles in securing funding. Subscription rates for these instruments have dipped below 60%, “underscoring lingering concerns about default risks and financial stability among weaker issuers,” according to market observers.
This trend highlights a pronounced shift towards credit quality, with capital increasingly flowing towards financially sound companies. Conversely, riskier issuers are encountering higher financing costs and diminished market access.
Rising Borrowing Costs Impact Issuance
Funding conditions have become less favorable overall. Yields on Thai government bonds have seen an increase, mirroring global market trends and elevated domestic government borrowing. Consequently, yields on three-year corporate bonds across all major credit ratings (AAA, AA, A, and BBB) have risen by 10 to 18 basis points since the close of 2025.
“The increase in borrowing costs led some companies to postpone bond offerings or raise funds only when necessary,” stated market analysts.
Focus on Refinancing Ability of Weaker Issuers
The primary risk facing the market is not widespread contagion, but rather the refinancing capacity of weaker issuers, particularly those that have previously undergone debt restructuring. Bonds currently experiencing debt servicing issues represent 2% of the total outstanding corporate bonds. Within this segment, approximately 0.2% are already in default, while 1.8% have undergone restructuring.
While debt restructuring can alleviate short-term liquidity pressures, it does not eliminate underlying credit risk. An estimated 4.9 billion baht worth of restructured bonds are scheduled to mature in the latter half of 2026, followed by an additional 12.9 billion baht in 2027.
Should these issuers fail to strengthen their financial positions, these maturing bonds could face renewed repayment difficulties. Investors are advised to closely monitor upcoming maturities among high-yield and non-rated issuers, especially those exhibiting fragile balance sheets, slow cash flow recovery, or limited access to new financing.
