G-bonds attractive to commercial banks

August 18, 2012 | 08:45

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Commercial banks have bought more Government bonds recently, with the State Treasury raising VND5.65 trillion ($269 million) on August 6 for bonds that mature within two, three or five years.

On July 27, the agency also sold VND5 trillion ($238 million) worth of government bonds (G-bonds).

The number of G-bonds sold as much higher than the figure recorded at the tenders organised in late June and early July. At that time, only VND1 trillion ($47 million) worth of G-bonds were issued at each tender.

The number of participants in the recent tenders also increased significantly. Most of them were commercial banks.

Experts said that commercial banks were participating more actively because the central bank had plans to reduce its benchmarked interest rates (refinancing, and discount interest rates, as well as overnight rate) in the near future.

The inflation rate has continued to fall, thus creating opportunities for the central bank to lower its benchmark interest rate by 1 per cent. As a result, more investors, including commercial banks, have decided to further invest in G – bonds in hopes that the interest rate on G-bonds would also be lowered.

In addition, other factors, including improved liquidity in the banking sector and weak credit activities, have also made investment in G-bonds more attractive. Continuous decreases in inter-bank interest rates were another factor in increased purchases of G-bonds.

The State Treasury plans to raise an additional 6 trillion VND ($285 million) in late August.

The Ha Noi Stock Exchange will organise the tender for G-bonds, which will be issued on August 21.