Bond sales land Vietnam $367 million windfall

By October 6, 2016 | 06:22 pm PT

Vietnam has increasingly turned to local debt markets to meet its financing needs. Photo by Reuters

Long term bonds with high yields were snapped at the auction in Hanoi this week.

Vietnam’s State Treasury raised VND8.2 trillion ($367 million) at a government bond auction at the Hanoi Stock Exchange on Wednesday.

At the auction, the government offered a variety of Vietnamese dong-denominated bonds of 5, 10, 20 and 30 years, but offering lower yields than at previous auctions.

Investors, mostly commercial banks, asked for yields ranging from 4.5 to 7.2 percent for five-year bonds, and 6.1 to 8.3 percent for the 10-year option. They were also willing to buy 20-year bonds with yields between 7.65 percent and 8.5 percent, and 30-year bonds at 7.95-9.2 percent.

However, the debt office decided to hold the rate for five-year bond yields maturing in 2021 at 4.9 percent, while long-term bonds maturing in 10 years or 20 years were offered at 6.2 percent and 7.72 percent, the Hanoi Stock Exchange said.

The State Treasury still sold VND1 trillion worth of five-year bonds at 4.9 percent yields, lower than the 5.76 percent offered at the last auction in August.

A total of VND1 trillion worth of 10-year bonds were sold at 6.2 percent against 6.94 percent last time.

Another VND1 trillion worth of 20-year bonds were offered at 7.72 percent, slightly down from 7.73 percent in September.

The debt office also managed to raise VND5.2 trillion from selling 30-year debt maturing in 2046 at a yield of 7.98 percent, unchanged from the previous auction.

Investors submitted bids worth VND14.85 trillion, which was nearly twice what us up for sale.

Traders said the auction showed the government was no longer willing to borrow at higher yields, especially in the near term.

With external public debts falling, Vietnam has increasingly turned to local debt markets to meet its financing needs.

In recent years, Vietnam has borrowed more from local debt markets. As a percentage of the total outstanding amount of government debt, domestic debt rose from 39 percent in 2011 to 57 percent in 2015, said Vo Huu Hien, deputy head of the Department of Debt Management and External Finance.

Hanoi-based partly private bank BIDV said sales of Vietnamese dong-denominated bonds from 2011-2015 increased two and a half times as fast as the average pace from 2006-2010.

Last year, in an attempt to mitigate the risks of debt repayments, Vietnamese lawmakers set new rules for the local debt market.

Following the new regulations, the State Treasury, which holds weekly bond auctions at the Hanoi Stock Exchange, is offering more long-term bonds and cut the trading volume of short-term bonds so that the proportion of bonds with tenures of five years or more will increase to 46 percent of the gross debt.

Statistics show from 2011 to 2013, the Vietnamese government mainly sold bonds with terms of less than three years. It has gradually extended the tenure from three years in 2014 to 4.4 years in 2015 and to five years in the first half of 2016. Bond yields have fallen from 12 percent in 2011 to around 6 percent in 2015.

> Bond sales slow down as banks buy less amid economic growth

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