Government adopts State bond issuance with all terms

The Government has adopted the finance ministry's suggestion to issue State bonds with all terms, as bond sales have slowed for the last few months. -Photo fica.vn

This means that the bonds can be issued with one-year, two-year and three-year terms again, besides the terms of five years or longer.

Prime Minister Nguyen Tan Dung authorised Minister of Finance Dinh Tien Dung to present the issue at the upcoming National Assembly (NA) session, expected on October 20, for permission to implement it from next month.

The law on public debt management, and Decree No 01/2011/ND-CP issued in January 2011, enabled State bond issuances under any terms.

However, the NA resolved in November last year that the ministry's state treasury would only be allowed to issue bonds with terms of five years or more, as a measure to ease pressure related to public debt burdens.

This decision came at a time when the use of short-term loans for long-term investments was apparently risky, as the shorter terms meant the more hastened debt payment responsibility.

During the government's regular meeting last September, ministry officials proposed the re-issuance of State bonds with terms of less than five years, arguing that the more diversified types of bonds would accelerate market development.

The National Financial Supervisory Commission (NFSC) said it would be difficult for the State bond issuance quota to be achieved this year, since State bond sales had been sluggish for the last few months.

According to the Ha Noi Stock Exchange, five-year bonds worth VND2 trillion (US$88.89 million) sold out during an auction here on October 7, with a winning interest rate of 6.65 per cent per year.

But only VND12.8 billion out of VND1 trillion ($44.445 million) worth of 10-year bonds, were sold on the same day, with a winning rate of 6.90 per cent per year.

Last week, the ministry reported that the treasury had sold bonds worth about VND127.43 trillion ($5.66 billion) during the first nine months, representing only half of this year's target and 60 per cent of the figure recorded in the same period last year.

The amount had already included the $1 billion that the treasury mobilised from Bank for Foreign Trade of Viet Nam, or Vietcombank, in April.

The ministry said sluggish bond sales were due to disadvantages in the financial and monetary markets during the third quarter, which resulted from the depreciation of the Chinese yuan and other currencies in the region.

"Developments in the foreign currency market have strongly impacted investors' psychology in the bond market, leading to sharp decline in the demand for government bonds," the report said.

This year, the ministry is targeting a total State bond issuance value of VND250 trillion ($11.11 billion), with VND180 trillion ($8 billion) in five-year bonds and VND50 trillion ($22.22 billion) in 10-year bonds, along with VND20 trillion ($888.89 million) in 15-year bonds.

According to the NFSC, except for 15-year bond issuances that has exceeded this year's quota by some 34 per cent, five-year bond issuances had only reached nearly 20 per cent of the annual goal, and 10-year bond issuances, less than 13 per cent of the annual plan.