Sun to shine on bond auctions

The government sold VND500 billion ($24.1 million) worth of three-year bonds, or 100 per cent on offer, at the yield of 12.1 per cent in an auction held on December 8, announced to the Hanoi Stock Exchange (HNX).

Three bidders registered for VND800 billion ($38.6 million) worth of notes, seeking yields ranging from 12.1-12.5 per cent.

Government bond auctions were quiet for the past month, but suddenly rallied this week with VND300 billion ($14.5 million) worth of three-year notes sold thanks to the central bank’s National Assembly statement of likely lower interest rates.

Fixed yields of recent three weeks kept unchanged at 12.1 per cent, slightly down from some 12.2 per cent in November.

“Expectations of a decrease in interest rates has improved the bond market with increasing sold volumes and declining yields,” said Vu Tu, head of research at Viet Capital Securities. “In our opinion, there is big possibility of interest rates being reduced in the end of 2012’s first quarter.”

Tu added that some major banks might have idle fund sources but are struggling to find the suitable investing channels.

“Those banks are meeting difficulties in lending their money because it’s hard to find a good client at the moment. Even lending in the inter-bank will be limited as borrowing banks must have to guarantee assets for the loans,” said Tu.

Still, analysts largely predict that government bond auction will remain quiet until the year’s end, as commercial banks are usually face liquidity shortages.

However, Tu added: “We are not too pessimistic about the bond market as banks still find it hard to seek a suitable investing channel for idle funds.”