G-bonds with a five-year tenor were snapped up last week, marking the third consecutive week of good debt sales. Twenty investors attended the bond auction held by the State Treasury on the Hanoi Stock Exchange (HNX).
Closing the auction, they acquired VND3 trillion (US$134.46 million) worth of G-bonds at a coupon of 6.65% per annum. Of an additional five-year bonds issued later and worth VND500 billion, investors bought VND320 billion worth of debt at the same coupon.
Five-year and three-year bonds issued by the State Treasury have attracted many institutional investors, mainly commercial banks after a long period of sluggish demand.
Meanwhile, demand for G-bonds with a ten-year tenor remained lackluster though the bond yield was revised up 10 basis points to 7% per year.
According to the northern exchange, the State Treasury has mobilized over VND104.92 trillion (US$4.7 billion) from G-bond sales in the year to date, meeting around 50% of the full-year target.
Banks also grabbed almost all G-bonds of three-year and five-year tenors issued by Vietnam Bank for Social Policies and Vietnam Development Bank. However, it was hard to find buyers for 10-year and 15-year bonds though the two organizations offered higher coupons than the State Treasury did.
Some institutional investors said the primary bond market has turned bustling since the State Treasury increased the five-year bond coupon by 20 basis points to 6.65% per annum a month ago.
The winning ratio has risen to 39% following a record low of 16% last month. The Vietnam dong has strengthened 0.5% against late September as the State Bank of Vietnam issued Circular 15 tightening rules on foreign currency trade to discourage people from hoarding the U.S. dollar.
This has helped spur demand for bonds, said specialists at Viet Capital Securities Company.
Experts credited the recovery of the bond market to the Ministry of Finance’s effort to raise funds from different sources to finance State budget deficit. The ministry borrowed VND30 trillion from the central bank and plans to issue US$1 billion worth of G-bonds for Vietcombank.
The Government is seeking the NA’s nod for a plan to issue US$3 billion worth of sovereign bonds on international capital markets. Though the plan has not been passed, it has left positive impact on the State Treasury’s bond sales.
Therefore, five-year bonds are projected to remain attractive to investors and their coupons may hover around 6.6% per annum.
As G-bond sales have been slow since the beginning of the year, the Government has asked the legislature to permit G-bond issues with tenors of less than five years.
The Government’s plan to issue US$3 billion worth of sovereign bonds and G-bonds with shorter terms has got the green light from the NA’s Financial and Budgetary Committee. If the plan is approved, it is expect to encourage banks to use short-term capital to invest in bonds.
On the secondary bond market, foreign investors last week maintained their net buying for eight weeks in a row, spending VND770 billion mainly on one-year bonds.
They have net bought VND5.95 trillion worth of bonds over the past two months.
G-bond yields for most tenors have inched up, according to a report of Bao Viet Securities Company./.
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