Ministry of Finance has expressed satisfaction over the success of the third tranche G-bond issue of 2010 on March 10. The government raised total 3.020 trillion dong of two-year bonds and 200 billion dong of three-year bonds from the big buyers including Maritime Bank, Vietinbank, Techcombank, ACB, VIB Bank, Eximbank and Bidv.
On March 18, the following bond tender valued at one trillion dong will take place on Hanoi Stock Exchange (HNX) and this is expected to be successful also.
The factor promoting the successful bond tender of March 10 came from the attractive coupon rate. Ministry of Finance approved the winning coupon rates of both above terms (two-year and three-year) at 12 percent pa, equivalent with SBV's ceiling level and higher one percentage point than the previous tender (on February 2010). However, the winning coupon rate remained much lower than the real negotiated interest rate of enterprises at banks. Yet, credit institutions (mainly commercial banks) still purchased and used these 3rd tranche G-bonds on the open market (OMO). Deputy general director of a bank said, banks can trade bonds to take the short term dong on OMO with the interest rate of about 8 percent a month for terms of 1-4 weeks.
The problem is whether banks will continue purchasing extra trillions of dong in bonds or whether the finance ministry will fix a higher coupon rate band or not. As estimated, credit institutions will not buy additional high volume of G-bonds because they could not raise much capital at low deposit rates. Furthermore, total daily trading value of OMO is limited because banks must meet a lot of strict requirements (along with valuable papers) to borrow capital via OMO. Some times Central Bank had to limit the capital pumping into OMO at the highest level of seven trillion dong a day.
MoF's coupon rate increase inflected right the demand and supply of market because from the start of March 2010, the yield rate of bonds on Hanoi Stock Exchange surpassed 11.5 percent pa. Financers forecast that the coupon rate of G-bonds could be hiked further to new highs if the problems in banks' liquidity are treated.
Currently, because of the difficulties in credit development, some banks are restructuring bond portfolio and focusing on the bond trade including both corporate and international bonds. In 2009, few banks decided to invest in short term bonds because of high safety rate instead of depositing money at foreign banks, which brought huge profits to banks.
Notably, banks paid more attention to corporate bonds. When cannot borrowing bank loans, enterprises used to issue 1-2 year corporate bonds at floating coupon rates (equalling to 12-month saving rates of credit institutions plus 3-4 percentage points). According to regulations, the coupon rate of corporate bonds is not limited by SBV's ceiling interest rate. But, domestic corporate bond is not the absolutely safe finance product. One bank bought bonds of a state-guaranteed group with the annually fixed coupon rate on every December 31. But when the interest payment date came, the group [issuer] asked to delay the payment to extra three months.
As planned, total G-bond capital assigned to ministries, sectors and local governances will be 56 trillion dong, particularly 20.2 trillion dong will be managed by five ministries of defense, traffic and transport, agriculture and rural development, health and police and the remainder will be allocated to local governances. Thus, MoF will have to issue at least 56 trillion dong of bonds to the state budget, excluding the bond volume for paying advances of State Treasury in 2009, some state corporations and groups.
Since the beginning of 2010, Vietnam has issued 3.297 trillion dong already.
In 2007, the G-bond issue in dong attracted many foreign investors. But presently, no foreign investor almost joined Vietnam's dong bond tender for the fear of the appreciation of US dollar against the dong. Since last November, US dollar price increased total 6.8 percent against the dong.
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