Bond sales slow down as banks buy less amid economic growth

By An Hong   May 5, 2016 | 11:07 am GMT+7

Vietnam’s banks are cutting investments in government bonds as the economy continues to grow, boosting demand for funds.

Vietnam's State Treasury said just VND30.3 trillion ($1.4 billion) was raised through government bond auctions last month at the Hanoi Stock Exchange, down 11.3 percent from March.

At the previous auctions of government Vietnamese dong-denominated bonds in March, the Treasury raised nearly VND34.3 trillion dong.

The Hanoi Stock Exchange, where the Treasury holds weekly bond auctions, said bond sales in the first few months of this year have slowed down.

Statistics show sales of government debt in April continued to decrease from March after having plunged by nearly 26 percent from February.

Commercial banks, which have been biggest buyers in recent years, prefer to invest in medium-term bonds, including three-year bonds at yields of between 5.52-5.55 percent and five-year bonds at between 6.39-6.4 percent.

Bonds have remained one of the key sources of fund for government spending.

In addition, Vietnam has to seek funds as its fiscal position has weakened in recent years, according to the United Nations in its latest report for the Asia-Pacific region, The country's budget deficit reached 6.6 percent of gross domestic product (GDP) last year, while the public debt jumped to 61 percent of GDP.