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Hunting for Vietnamese international bonds
While domestic commercial banks are not interested in government bonds in VND, they have been hunting for government bonds which were issued in international markets three years ago.
VND government bonds unattractive
Once again, the efforts to issue 2 trillion worth of government bonds last week were unsuccessful. And the reason proves to be the same: The interest rates demanded by commercial banks were higher than the set ceiling interest rates.
In fact, the ceiling interest rates of the bonds were significantly higher this time – 8.3 percent per annum for 3-year term and 8.4 percent per annum for five-year term bonds. One month ago, the ceiling interest rate was 7.2 percent.
The 1.1 percent and 1.2 percent increases in the ceiling interest rates for the bonds were equal to the increases in deposit interest rates joint-stock banks made recently (Vietcombank HCM City branch has raised deposit interest rates by 1 percent per annum on all terms of deposits, while Techcombank by 1.3 percent).
However, the impressive increases in the bond ceiling interest rates still did not impress buyers. Commercial banks wanted the interest rate of 9.5 percent per annum for 3-year and 10 percent for 5-year term bonds.
2-3 year bonds are being offered for purchase at 9 percent per annum on the market.
There were two reasons for the bond interest rates increasing.
Firstly, commercial banks will not make profit if they purchase bonds at an interest rate below 9.5 percent per annum, as VND deposit interest rates have been increasing.
Secondly, most institutions, including foreign funds, think that high inflation is getting set to return.
Hunting for Vietnamese internationaly bonds
While domestic commercial banks are not interested in government bonds in VND, they have been hunting for government bonds which were issued in international markets three years ago.
Sources say that the State Bank of Vietnam has allowed one state-owned bank to buy back some international bonds which have the original interest rate of 7.2 percent per annum.
Last year, a lot of foreign banks offered to sell Vietnamese international bonds, but Vietnamese banks dared not purchase the bonds because of difficulties in ownership transfer (Vietnamese international bonds were sold to foreigners only, and the ownership transfer could only be done with the permission of the State Bank of Vietnam.
However, now, even though banks have gotten permission from the State Bank, they are not finding it easy to find bonds. The institutions which are holding bonds do not want to sell bonds at present as the bond income is high while the dollar interest rate is low. A foreign investment fund in HCM City, which previously made investment in Vietnamese international bonds, said that it will not sell the bonds before maturation.
Domestic banks have been trying to purchase bonds because they have been trying to find investment channels for their profuse capital in foreign currencies.
VietNamNet, TBKTSG
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