Vietnam treasury bond sales extend losing streak

By An Hong   May 31, 2016 | 06:45 pm GMT+7

Vietnamese bond sales continued to drop off in May with commercial banks projecting lower yields following the central bank’s move to cut interest rates.

Vietnam's State Treasury raised only VND29.2 trillion ($1.3 billion) from government bond auctions in May at the Hanoi Stock Exchange, down four percent from April, according to data compiled by leading partly private commercial bank BIDV released on Tuesday.

Statistics show that the treasury raised VND30.3 trillion from G-bond sales last month.

BIDV said that medium-term bond yields, including three-year and five-year bonds, fell sharply to 5.3 percent and 6.14 percent respectively. Long-term bonds with tenure of 20 years were offered at 7.75 percent.

Commercial banks, which have been dominant buyers in recent years, prefer to invest in medium-term bonds.

In April, banks were willing to invest in three-year bonds at yields of between 5.52-5.55 percent, and five-year bonds at 6.39-6.4 percent.

Statistics show sales of government debt in April continued to fall from March after plunging by nearly 26 percent from February.

According to BIDV, banks have reduced their investments in government debt as they expect yields will fall further following interest rate cuts.

The central bank late last month asked lenders to trim interest rates on dong loans, putting a cap of 10 percent rate on medium and long-term loans in an attempt to support private businesses.

The lending cuts were made after the Prime Minister promised the business community a more favorable environment.

BIDV forecasts the annual coupon rate will slip in June to between 4.5 percent and 4.8 percent for one-year terms, 4.7–5 percent for two years, 5.2–5.5 percent on three years and 5.9–6.2 percent on five years.

The slowdown in bond sales reflects the expectation that the central bank will continue to loosen monetary policies in the months to come, said BIDV.