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The prices of US$ bonds
Statistics show that some $20 billion dollars has been deposited by people and businesses at banks. The high volume shows that there are many bond potential buyers.
US$ bonds may ‘rescue’ bond issuance plan
It is clear that the plan to issue 55 trillion dong worth of Government bonds in 2009 is now under pressure, since only 6,000 billion dong worth of bonds have been sold so far.
As the offered interest rates for VND bonds prove to be unattractive, investors have been turning their backs. All three bond bids failed last week. Only 100 billion dong worth of bonds were sold, while 2,500 billion dong worth of bonds were on offer.
Therefore, experts say that US$ bonds may be what is needed to ‘save’ the plan on issuing 55 trillion dong worth of bonds. The three bond issuances in late March 2009 have brought hope: 230 million dong of 300 million dong worth of bonds were sold.
To date, there has been no official information released about the detailed plan on issuing US$ bonds, including bond terms and interest rates. Meanwhile, experts say that these would be the key factors in whether the bond issuances would be successful or not.
What prices for bonds?
The high volume of $20 billion worth of deposits at banks shows that there are many potential buyers. It is clear that purchasing Government bonds with the risk of zero is more attractive to banks than depositing at foreign banks with high risks.
Manager of a state-owned commercial bank affirmed that Government bonds in foreign currencies with the terms of less than one year would sell like in March 2009, when all $100 million worth of bonds were sold at the interest rate of 3 percent per annum.
However, the manager is not sure about longer-term bonds (2, 3 or 5 year term).
The problem lies in the fact that though banks have profuse money, their capital is not long-term capital. Director of a bank said that most deposits are less than six-month term deposits. Therefore, banks would prefer purchasing less than one year bonds, while they would need high interest rates for long-term bonds.
At the bond issuance in March 2009, the offered interest rates were 3.2 percent and 3.6 percent, respectively, for 2 and 3 bonds.
“It would be difficult to issue bonds with those interest rates. The rate should be over 4 percent,” the director said.
Of course, the Ministry of Finance does not want to pay high interest rates. However, there is every reason to believe that it will have to accept higher interest rates to obtain successful bond issuances.
If the Ministry of Finance pays reasonable interest rates, the sum of $1 billion worth of bond issuance may not be an unreasonable goal.
VietNamNet, DTCK
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