VietNamNet Bridge – Government bond yields have kept falling on the primary and secondary market over the past week as banks with a cash surplus have sharply increased bond buying.

The government bond market turned active on Tuesday. Bond yields on the secondary market continued to drop by five to 10 basis points, standing at around 8-8.05%, 8.25-8.3% and 9% per annum for two, three and five-year terms respectively.

Last week, the rates were 8.1%, 8.35% and 9.05% per annum respectively.

Monday also saw a bustling government bill auction with VND2 trillion worth of promissory notes sold out but coupons tumbled by 40 basis points, closing at 7.28% per annum for the 52-week term.

The State Treasury has also issued over VND6.9 trillion worth of bonds with terms from two to five years. The winning coupons have dropped back slightly compared to the previous week to 8.24%, 8.45% and 9.2% for two, three and five-year terms respectively.

Over the past two weeks, winning coupons have lost by 5 to 10 basis points in every bidding session, suggesting that the Government’s capital cost has slightly declined and inflation is expected to reduce in the coming months.

The number of bidders remains high at 14 to 22 members each session while bidding volumes are two to three times higher than that offered. This has proved an increasing liquidity surplus at credit institutions.

Some banks predicted that government bond yields will continue to fall in the coming time. Next week, the yields are expected to drop further by five to 10 points, a financial analyst told the Daily on Wednesday.

Government bond supply on the primary market is expected to stay high this month with VND6 trillion worth of government bonds, VND4 trillion worth of government-backed bonds and VND2 trillion of government bills. Banks still have a strong demand for these valuable papers given liquidity in excess.

Mobilization is projected to outpace credit growth and investors have tended to buy bonds before those in their portfolio fall due.

The State Bank of Vietnam’s bills at maturity has increased by VND5 trillion compared to that of last week. Meanwhile, this agency seems to halt bill issuance this week.

Notably, dong interest rates on the inter-bank market has also declined by 25 to 80 points to around 2.5-3% for overnight term, 3-3.5% for one-week term and 4.5-5% for one-month term.

Source: SGT