Government bond market sinking

Government employees handle bonds at the State Bank of Vietnam’s headquarter in Ha Noi.- Photo tapchitaichinh.vn

In particular, during a bond auction held by Hanoi Stock Exchange (HNX) on Wednesday, the VST put $89 million worth of bonds on offer, divided equally among four maturity periods - from five years, seven years, 10 years and 30 years.

The five-year bonds auction attracted 15 participants with bidding value up to VND3.2 trillion ($142.4 million), but the annual registered interest rates remained high at between 4.57 per cent and 5 per cent. This resulted in no capital mobilised.

Seven-year bonds attracted nine bidders with the highest amounting to VND1.5 trillion ($66.7). The lowest interest rate was 4.87 per cent and the highest 5.2 per cent. This sector successfully mobilised VND100 billion ($4.4 million) at the final interest rate of 4.87 per cent, 0.02 percentage points higher than the picked interest rate on November 1.

Ten-year bonds also gathered a combined value of VND1.6 trillion ($71.2 million) from nine bidders. The lowest interest rate was 5.41 per cent. The highest at 6 per cent. The result was only VND35 billion ($1.5 million) of 10-year bonds sold with the winning interest rate of 5.41 per cent, 0.01 percentage point lower than at November 1.

The 30-year bond attracted six bidders. The highest was valued at VND576 billion ($25.5 million). The lowest interest rate was 6.1 per cent and the highest was 7 per cent. As a result, only VND5 billion ($222,500) worth of 30-year bonds were auctioned at a winning interest rate of 6.1 per cent annually.

For the first auction in November 2015, the VST managed to mobilise only VND1.1 trillion ($48.9 million) worth of Government bonds, out of a total of VND3.15 trillion ($140 million) value on offer, at a 37.43 per cent success rate.

Explaining the recent sluggishness of Government bonds, experts from the HNX said since the liquidity of banks, which were the main investors in Government bonds, had gone down hill, as they had to spend capital to meet increased demands for credit at the end of the year.

The banking system’s liquidity is narrower than earlier this month. The State Bank has injected nearly VND6.8 trillion ($302.6 million) after a constant net withdrawal in the last five weeks.

However, the interbank interest rate has slightly increased in all three key terms after weeks of decline. From the beginning of the year to date, the VST has mobilised VND156.4 trillion ($6.9 billion) worth of Government bonds through bidding on the HNX.