MoF blames failed T-bond issuances on US financial turmoil
07-OCT-2008 Intellasia | Vietnam Investment Reviews page 5
Oct 7, 2008 - 7:00:00 AM
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The State Treasury's two T-bond auctions in the last two weeks failed due to the impact of global financial instability, according to the Ministry of Finance (MoF).
The two bond auctions on September 22 and October 2 offered a total of 1,500 billion dong (US$90 million) worth of two-year bonds and 500 billion dong (US$30 million) worth of three-year bonds. However, no investors took the lots as a 15% per year ceiling yield was lower than the bidding yield of 16.5% per year.
The US credit crisis has affected other financial markets globally, as well as investors in Vietnam, said Pham Phan Dung, head of MoF's finance-banking department.
"In theory, once Vietnam's economic fundamentals have improved, the bond yield should be lowered. I think 15% per year yield was rational," said Dung.
Hoang Diem Thuy, at the Bank for Foreign Trade of Vietnam (Vietcombank) said that two and three-year bond yields on the market were around 16-16.5% per year.
"The State Treasury under MoF should set the yield for issuances to be more market-oriented with reference to the market yields," said Thuy.
However, Thuy admitted the global financial crisis has increased the bond yield on the market, in tandem with other markets.
The State Treasury's two successful issuances in August offered yields of up to 17-17.5% per year for two and three-year bonds. This offering closely reflected market rates at that time. Since then, Vietnam's economic fundamentals, including the consumer price index (CPI), have improved. In September, the CPI grew by 0.18% month-on-month, the lowest since March 2007.
"We [MoF] do not consider the most recent auctions as failures, because a successful auction requires that the buying side and selling side match the yield. Our offered yield was rational as the interest rate levels are on the way down," said Dung.
Local banks are lowering mobilising and lending rates en masse. Some financial experts have forecast that by the end of 2008, the mobilised interest rate would be 15-16% per year, and the lending rate around 18-19% per year.
"The interest rate's downward trend could continue through 2009 as inflation is brought under control. I think a 15% level could be a profitable level for bond holders," said Dung.
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