The pressure of issuing government bonds soars in Q4/2020

24-Jul-2020 Intellasia | Kinh Te Tieu Dung | 6:54 AM Print This Post

In the first six months of 2020, the State Treasury successfully issued over 87 trillion dong of government bonds, fulfilling 33.5 percent of the year plan.

According to data from the Hanoi Stock Exchange (HNX), in the first six months, the State Treasury successfully mobilised 87 trillion dong of the total amount of government bonds, completing 33,5 percent of the year plan.

However, at the request of the government to accelerate public investment in order to promote growth as well as a sharp decrease in budget revenue due to the COVID-19 epidemic, KB Vietnam Securities Company (KBSV) said that the State Treasury would have to boost quickly issuing government bonds in the second half of 2020 with the average issuance term of 10 years to 15 years.

The State Treasury was expected to have nearly 173 trillion dong worth of government bonds issued in the second half of 2020. Because the amount of bond maturing would focus on Q4 of this year, the pressure of issuing government bonds to reverse debt would be relatively low in Q3 and increased sharply in Q4.

Also, according to KBSV, the winning bond yield was expected to increase slightly as the liquidity might not be as abundant as in the first six months.

In the first half of 2020, short-term bonds such as five-year and seven-year bonds fluctuated slightly due to low demand and relatively low winning ratio, at about eight percent. Winning rates for long terms varied and diverged.

10-to-20-year yields tended to decrease in Q1 and increase gradually in Q2 due to concerns that budget deficits would rise sharply in 2020 due to COVID-19 epidemic.

However, the liquidity always maintained abundant status during the first six months, helping the winning interest rates in all tenors decrease significantly compared to the end of 2019. By the end of Q2, the yield of the bond at terms of five years, seven years, 10 years, 15 years, 20 years and 30 years were 1.95 percent per year, 1.90 percent per year, 2.98 percent per year, 3.15 percent per year, 3,42 percent per year and 3.10 percent per year, respectively.

KBSB experts believed that the liquidity in the short-term would be abundant and would be the main factor helping bond yields maintain a downward trend. However, with controlling factors such as liquidity expected to be less abundant as in Q1/2020 and inflation unpredictable at the end of the year, slight pressure on bond yields would be more precise toward the end of the year.

In the secondary market, liquidity was relatively stable in the first six months thanks to outright transactions. The total trading volume reached 1.168 quadrillion dong, up 14.2 percent over the same period.

The total outright trading volume increased by 54.2 percent compared to the same period last year to 709.163 trillion dong. The repos transaction decreased by 18.4 percent to 459.228 trillion dong. Foreigners were net buyers of 1.809 trillion dong, much lower than the amount of 9.922 trillion dong in the same period last year.

 

Category: Finance, Vietnam

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