The Federation of Thai Capital Market Organisations (Fetco) is urging the government to prohibit foreigners from holding bonds with maturity of less than six months.
It believes the move would be more efficient than a policy rate cut in addressing the baht's rapid gains.
"Speculative flows in short-term bonds are a cause of the baht's strength," Niwat Kanjanaphoomin, president of the Thai Bond Market Association (TBMA), said yesterday.
However, the proposed measure should not be retroactive in case it causes panic sales in the debt market, he said.
The TBMA is one of seven members of Fetco.
The other six are the Stock Exchange of Thailand, the Securities and Exchange Commission, the Association of Thai Securities Companies, the Association of Investment Management Companies, the Thai Investors Association and the Securities Analysts Association.
About 200 billion baht worth of net foreign holdings of Thai bonds at the end of 2012 was poured into short-end notes with a maximum maturity of one year.
Of the total, 180 billion baht was in bonds of up to six months, while 20 billion was in bonds of more than six months but not exceeding 12 months, said Mr Niwat.
Last year, the net foreign holdings of the Thai government and corporate bonds rose by 290 billion baht to a record 710 billion, representing 8.3% of the total, which was also a record and up from 5.9% at the end of 2011.
Foreign holdings of Thai bonds were worth 861 billion baht as of April 19, representing 15% of the market.
Despite the record high of foreign holdings of Thai bonds, the figure is expected to rise further, as it remains low compared with 30-40% in Indonesia and Malaysia.
The baht briefly rose to 28.55 to the US dollar in mid-April, making it the strongest currency at that time, on an influx of capital inflows, mostly in the bond market.
However, the baht weakened to above 29 baht before steadily hovering around its current level as investors fretted over whether the government and central bank will impose measures to tame fund inflows and the baht's appreciation.
The Finance Ministry and exporters have stepped up pressure on the central bank's Monetary Policy Committee to trim the benchmark rate, which stands at 2.75%, blaming the relatively high rate for luring capital inflows.
Mr Niwat said the Bank of Thailand's bills have gained popularity among foreigners.
He said a policy rate cut could reduce returns but also could fan inflation and affect consumers.
Regarding the imposition of a 15% withholding tax on bond investment, Mr Niwat said such a measure would be ineffective in addressing the baht's strength as returns would remain attractive.