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$820.7 mln G-bonds issue plan faces risk of failure
The State Treasury may face risk of failure in its plan of issuing about VND16 trillion (US$$820.7 million) of government bonds this month when just a handful of participants register for the purchase of the bonds.
Deputy General Director in charge of investment of a large commercial bank in Hanoi said that the yields on 3-year period at 10 percent were not attractive enough for investors, while a ceiling interest rate of the latest tenders on November 30 was 9.5 percent per year.
The upcoming G-bond issue is likely to fail, since after the successful session of October 28, 2010, so far all 15 auctions of government bonds in all consecutive terms of 3, 5 and 10 years were blank board bid as of last session on November 30 with no participants registered for tenders.
This failure sequence started from the session on November 5.
That milestone marked major changes in market interest rates, as well as the adjustment of the State Bank of Vietnam's monetary policy as the market faced liquidity problems of commercial banks.
On November 5, the State Bank simultaneously increased its key interest rates, which was accompanied by strong fluctuations of deposit interest rates of banks as well the tension of liquidity.
Analysts put forward the above incident to explain the failure of the bidding activities of government bonds, as indicated in the complete absence of participants in the session on November 5.
According to the periodical reports of some securities companies, the main cause was blamed for tensions on in the currency markets, which made banks find it hard to raise capital - the main drive force involved in the bidding of governmental bonds, and ceiling price of bonds was lower than expected.
And in efforts to increase the success of the plan of issuing about VND16 trillion of governmental bonds, the forecasts given is the State Treasury will likely have to raise the ceiling on interest rates.
Interest rates are too low, according to most banks. But talk to Vietnam Economic Times, bank leaders said that there is only one factor. "When making the investment decision, we also must balance many other factors," he said.
It is required to balance the assets of banks and investment costs in each period. Rising input interest rates have placed in a disadvantage compared with low yields. And a point of attention is required to balance capital and maturity. Bank needs to harmonies these requirements.
Since early November, the tight monetary policy has shown more powerful, reflected in liquidity problems and the escalation of interest rates on the interbank market. Interest rates have increased rapidly and tends to rise.
Meanwhile, besides low interest rates, the investment in bond funds is long-term and many banks are still thirsty for capital.
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