State bond yields fall sharply in third quarter

Thursday, Nov 27, 2014 16:41

Quicken economic growth and benign inflation have helped to reduce Viet Nam's borrowing costs in the third quarter. — Photo

HA NOI (Biz Hub) ─ Viet Nam's local currency (LCY) government bond yields fell sharply for all tenors in the third quarter of 2014, with declines ranging from 67 basis points (bps) to 212 bps.

The Asian Development Bank (ADB) made this announcement in its Asia Bond Monitor report this month, adding that the yield spread between two-year and 10-year bonds tightened to 197 bps from 306 bps at end-June.

Total outstanding LCY bonds in Viet Nam continued to grow on a quarterly and annual basis in the third quarter to reach VND802.8 trillion (US$38 billion). The growth was attributed to government sector expansion.

Outstanding LCY government bonds at end-September increased to VND791 trillion ($37 billion), a 1.9-per cent quarter-on-quarter and 54.5-per cent year-on-year increase.

Government issuance in the third quarter reached VND229 trillion, with the State Bank of Viet Nam providing VND202 trillion or close to 90 per cent of total issuances during the quarter.

LCY corporate bonds stood at VND11.8 trillion ($0.6 billion) by end-September.

Image from ADB's Asia Bond Monitor, November 2014.

Quickening economic growth, benign inflation and a credit rating upgrade from Moody's last July likely helped to reduce the country's borrowing costs. Real gross domestic product (GDP) growth accelerated to 6.2 per cent year-on-year in the third quarter from a revised growth of 5.4 per cent in the second quarter.

For the first nine months of the year, the country's annual GDP growth stood at 5.6 per cent, or more than the 5.2 per cent recorded in the first half of the year. The growth was attributed to the service, industrial and construction sectors.

Last September, inflation eased to 3.6 per cent year-on-year, the slowest pace since October 2009, from 4.3 per cent last August.

Indications of a possible upgrade from Fitch Ratings may have added to Viet Nam's positive momentum. Last September, Fitch commented that it may raise the country's rating in the next 12 to 18 months to BB-, three levels below investment grade, from B+ on stronger external finance.

Last July, the Government issued Decree No. 70/2014/ND-CP, allowing Vietnamese citizens to deposit foreign currency in local banks and withdraw principle and interest in the currency deposited.

Last September, the Viet Nam Securities Depository released the list of securities to be used as collateral under its Decision No. 111/QD-VSD on securities lending regulations.

This consists of 223 codes listed on the national stock exchanges, including government bonds and government-guaranteed bonds listed on the Ha Noi bourse. — VNS

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