SEVERAL of Thailand's top banks - including Siam Commercial Bank, Bank of Asia and Thai Military Bank - have sold as much as US$700 million (about HK$5.41 billion) worth of Thai baht-denominated certificates of deposit (CDs) out of their Hong Kong branchesover the past two months, according to Colin Blackwell, vice-president of Chemical Securities Asia. He said the banks, which were raising the money to lend to customers in Thailand, would sell another $500 million before the end of the year. The Thai CDs are a novelty to investors in Hong Kong, who were previously limited to Hong Kong dollar CDs. They are also a new form of financing for Thai banks. Mr Blackwell said Thai banks had found a receptive market in Hong Kong for the fixed-rate baht-denominated securities because they offered yields well above the comparable US government securities. The baht is a relatively stable currency because its value is pegged to the US dollar and other currencies, with the government monetary authorities setting the exchange rate on a weekly basis, providing some protection against potential foreign exchange losses. The CDs pay six to eight per cent annually and have maturities ranging from six months to five years. Those yields represent returns of between 1.25 and 4.75 percentage points more than the comparable US government securities. Such spreads are available in the US only on the most risky securities, so-called junk bonds. Thai banks offer the high rates because Thai interest rates in general are much higher than interest rates in the US. Moreover, Thai banks are not rated by the major credit agencies. Mr Blackwell said Chemical had underwritten 12 of the financings. US investment or commercial banks with branches in Hong Kong had arranged all the Thai-baht denominated financings to date, he said. The traditional source of Thai bank funds was the US-dollar floating rate certificate of deposit market, he said. Thai banks had sold about US$1 billion of this type of security so far this year. Issuing baht debt through a Hong Kong branch allowed the borrowers to avoid withholding tax on the transaction funds. A Lehman Brothers Securities Asia official said his firm had also arranged several Thai CD financings. Lehman has also set up a financing programme for the Industrial Finance Corp of Thailand (IFCT), the Thai development bank, under which the bank was given approval to sell notes in any Asian currency with maturities ranging from one day to 10 years. The Lehman official said Asian currency note programmes were being established for other Thai borrowers as there was a rapidly emerging need for such instruments. He said the recent batch of baht-denominated CDs for Thai banks ''is a contained phenomenon'', and did not expect the pace or volume of issuance to increase much by the end of the year.