VietNamNet Bridge - The proportion of government bonds sold in the primary market has dropped to a low of 20 percent for the year.

A report by the Hanoi Stock Exchange (HNX) showed that while the State Treasury planned to call for VND3 trillion worth of capital through bond issuance (VND2 trillion from 5-year bonds and VND1 trillion from 15-year bonds), it could mobilize VND613 billion worth of capital from 15-year bonds at the auction in mid-September. 

The bond interest rate was 7.65 percent per annum, equal to that of the previous auction held on September 3. This means that 20.4 percent of the offered bonds were sold.

Prior to that, the Vietnam Bond Market Association (VBMA) reported that the State could sell VND4.206 trillion worth of bond value out of VND14 trillion it planned to receive in August. 

As such, in July and August, only VND18.953 trillion worth of bonds were issued, far below the VND60 trillion the State Treasury plans to call from the public in the third quarter.

The Ban Viet Securities Company (VCSC), in its September report, showed that government bonds are unattractive to investors, and predicted that the Treasury’s plan in the third quarter would fail.

VCSC’s experts noted that investors, who are worried about the dong/dollar exchange rate fluctuations after the third exchange rate adjustment this year, expected to see higher bond yields. 

After the bond yield decreased by 0.1 percent to 6.4 percent, 5-year government bonds could not find buyers at the auction at the end of August. The bond yield later rose by 0.05 percent to 6.45 percent in early September. However, investors still hesitated to buy bonds as they hoped the bond yields would increase further.

Meanwhile, the bond yields in the secondary market have increased significantly because foreign investors have rushed to sell bonds amid the exchange rate fluctuations.

A report showed that foreign investors’ net sales reached VND4.3 trillion in August, higher than VND1.7 trillion in the first seven months of the year. 

However, analysts noted foreign investors were tending to buy more than sell in recent days.

VCSC, while predicting that the State Treasury may fail to implement the bond issuance program for the third quarter, said banks preferred using capital to lend instead of buying bonds.

Commercial banks had reported a credit growth rate of 10.23 percent by the end of August, a four-year high.

The deputy director of a joint stock bank in Hanoi denied that bankers now prefer loans to bonds, saying that banks instead had not injected money into bonds because of the new regulation which sets limitations on banks’ investments in government bonds.

VNE