State Treasury seeks nearly $11.7b from Government bond issuance

Friday, Feb 06, 2015 08:00

Data from HNX showed that around VND28 trillion ($1.3 billion) worth of Government bonds were sold in January alone, accounting for 83 per cent of the total issue. — Photo vinacorp

HA NOI (Biz Hub) — Viet Nam's State Treasury is targeting VND250 trillion (US$11.68 billion) by issuing five-year Government bonds this year, down 4.6 per cent from a year ago, said the Ministry of Finance.

Of this, VND180 trillion ($8.4 billion) will be mobilised through five-year bonds, VND50 trillion ($2.33 billion) through 10-year bonds and VND20 trillion ($934.5 million) through 15-year bonds.

Speaking at the conference on the members of the Government bond market 2015 held in Ha Noi on Wednesday, Finance Deputy Minister Tran Xuan Ha hailed the efforts of its members, issuing organisations, the Ha Noi Stock Exchange (HNX) and the Viet Nam Security Deposit (VSD) in contributing to the market's development.

Ha said their strategic duty is to ensure capital for the State budget and that development activities have set targets, with terms longer than five years.

They should also work to enhance liquidity and transparency.

HNX should also prepare a facility and legal framework for the development of derivatives market, Ha added.

The exchange said it will develop the government bond market comprehensively, raising transaction value and liquidity while actively supporting the mobilisation of the State budget and the country's socio-economic development.

Its online bond transactions will be completed at a faster pace. It will also co-operate with relevant agencies to develop new products, such as Zero Coupon Bond, which is being developed by the Ministry of Finance and the State Securities Commission (SCC).

This year, HNX will also concentrate on building the enterprise bond market project and submit a proposal about the same to the Ministry and the SCC for approval.

Over the past five years, the Government bond market has developed rapidly, contributing to the Government through capital mobilisation and creating liquidity for the secondary market.

Data from HNX showed that around VND28 trillion ($1.3 billion) worth of Government bonds were sold in January alone, accounting for 83 per cent of the total issue.

The interest rate for auctioned bonds was lower than the average seen in previous years, despite a higher rate and number of bonds sold.

HNX had organised 22 auctions to sell Government bonds in January. Of these, three-year and five-year bonds were mostly bid for. The State Treasury of Viet Nam earned over VND17 trillion ($809.5 million) from the auctions.

At the auction on January 29, more than VND8.4 trillion ($392.5 million) was mobilised, including VND6 trillion ($280.3 million) from five-year bonds.

In addition, the Viet Nam Development Bank (VDB) mobilised VND9 trillion ($420.5 million) by issuing Government bonds.

HNX said the results of the auctions this year revealed that money has flowed into the market. Banks are keen on short-term bonds, with a lower interest rate than the one reported in 2014.

However, banks have encountered difficulties, despite the attractiveness of the investment channel.

As per an official decision, the Government will issue bonds with a term longer than five years, but not short-term bonds, to reduce State budget overspending.

In reality, the number of two-year bonds circulated in the market made up for the highest portion at 35.2 per cent, while a 34.5 per cent share was made up by three-year bonds; 21.8 per cent by five-year bonds; 6.1 per cent by 10-year bonds and 2.3 per cent by 15-year bonds.

The head of a commercial bank was quoted as saying by online newspaper that banks will carefully consider buying long-term bonds, despite redundant capital being available in the banking system.

He added that short-term capital often accounts for a high portion of banks' capital. If banks used the capital to buy long-term bonds, they will face risks, because selling in the secondary market will not be easy. — VNS

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