G-bond interest rates around 2pct.

11-Jun-2020 Intellasia | Dau tu Chung khoan | 7:35 AM Print This Post

In May, the Hanoi Stock Exchange (HNX) held 16 government bond (G-bond) auctions and mobilised a total of 18.392 trillion dong, up by 510 percent compared to April.

In particular, 100 percent of the mobilised bonds were issued by the State Treasury. The winning rate in May was 70.3%, with bidding volume being 2.6 times larger than offer volume.

Compared to April, the winning interest rate of the State Treasury bonds in May increased on all terms with an increase of 022   0.4 percent per annum. Specifically, the five-year and 10-year winning interest rate recorded the strongest rise of 0.4 percent per annum, reaching 2.2 percent per annum on five-year term and 2.63   2.9 percent per annum on 10-year term.

Although the winning interest rates increased, the interest rate level remained low. From a macro perspective, the low G-bond interest rates show that market and investors have confidence on the medium and long-term economic prospects of the country.

The successful issuance of long-term bonds with low interest rates will help the government reduce mobilisation costs and stabilise debt repayment flows, thereby reducing the burden on the state budget and creating favourable conditions for the government to be more active in development and investment activities.

Meanwhile, for investors, the decision to invest in G-bonds with low interest rates is due to several reasons.

Dr Can Van Luc, senior advisor of Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) shared that in the context when the economy is facing numerous post-Covid-19 pandemic risks, safe investment channels such as G-bonds always attract the attention of investors.

In addition, although the G-bond interest rates have been maintained at low levels recently, these interest rate levels are still attractive compared to many other investment channels.

Not to mention that investors are currently pursuing a strategy to diversify investment channels to maximise profits and better control risks.

According to data from SSI Research, the offer volume of the State Treasury has continuously increased in recent weeks.

In May, the SBV offered 26 trillion dong of G-bonds (up by 58 percent compared to April), issued 18.4 trillion dong (six times higher than April and the most-issued month since the beginning of the year). About 98.4 percent of the issuance volume in May are on 10-year and 15-year terms, with winning interest rates respectively increase by a total of 47 basis points and 22 basis points.

The State Treasury set a plan to issue 60-70 trillion dong in the second quarter of 2020. Despite the strong increase in May, the issuance volume by the end of May accounts for only 35.8 percent of the issuance plan in the second quarter 2020 and 21 percent of the issuance plan for the whole year 2020.

This is the reason why SSI Researched forecasted that the supply of the State Treasury in June will be high and the investment needs of market members will also increase, especially when the liquidity is abundant and the interbank interest rates are at a very low level. The winning interest rates are likely to move sideways in June.

Meanwhile BVSC stated that the winning interest rates have gradually been pushed up, thereby improving the winning ratio.

It is likely that in the coming weeks, G-bond interest rates will continue to increase slightly, creating a motivation to attract capital flows thereby supporting the ability to complete the issuance plan in 2020.

Talking about the possibility of completing the bond issuance plan in 2020, especially when the completion rate was only 21 percent after the first five months of the year, Luc said, adding that there is no need to be too worried.

In fact, financial activities have just returned to normal after a period of suffering the pandemic. Accordingly, the high value of G-bond issuance value in May   the highest level since the beginning of the year   is also a good sign which shows that the market is “getting warmer” after the period of social distancing.

According to data of SSI, after the strong net selling in the first quarter, foreign investors returned to net purchase in April and May. In general, in the first five months, foreign investors net bought 162 trillion dong of G-bonds on secondary market.

 

Category: Finance, Vietnam

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