The Bank of Thailand took another step in dealing with rising inflation pressures as they expectedly raised rates by 25 bps to 2.5% but this rate still remains below the current level of inflation of about 3% and compares with a new Thai forecast of 3-5%. Nominal rates are thus going higher but real rates are not. This move follows a hike from Vietnam yesterday and an expected rate hike from South Korea tomorrow. With growing pressure on Portugal to get a bailout, they sold 1b euros of 2 1/2 yr paper at a yield of 5.99% with a bid to cover of only 1.6. With respect to the debt fire that can’t be put out in Europe, it still comes down to whether it spreads to Spain and Italy. Spain’s 10 yr yield at 5.49% is just 5 bps from the highest since Sept ’00 and Italy’s is at the highest since Nov ’08 at 4.97%. II: Bulls 52.2 v 50.6 Bears 21.1 v 19.5
