LOCAL BANKS INVEST MORE IN LONG-TERM BONDS

Commercial banks have been active in the bond market, buying more 30-year Government bonds which they earlier considered risky, according to Forbes Vietnam.

Earlier, bonds with a tenor of 30 years were mainly bought by insurance companies but last year saw a drastic shift when banks bought most of the 30-year bonds issued by the State Treasury thanks to abundant liquidity in the banking system. Credit institutions last year bought nearly VND15 trillion (US$660 million) out of VND28 trillion worth of 30-year bonds successfully issued.

Since mid-May last year, interbank interest rates have plunged due to massive capital flows into the Vietnamese market and difficulties in public investment disbursements, prompting the State Treasury to transfer a large amount of deposits at the State Bank of Vietnam to commercial banks, according to Vietcombank Securities Company (VCBS).

A large amount of 20- and 30-year G-bonds were issued last year. By the end of July, the State Treasury had sold a large amount of long-term bonds and reduced short-term ones as 55% of G-bonds issued last year had terms of at least 10 years.

Last year, more than VND192.9 trillion was mobilized in the primary bond market and VND2,250 trillion in the secondary bond market. The State Treasury, Vietnam Development Bank and Vietnam Bank for Social Policies as bond issuing agencies were able to mobilize funds with longer tenors and lower interest rates.

The State Treasury issued VND159.92 trillion worth of G-bonds last year, accounting for 83% of the total.

The average tenor was 13.52 years, up from 8.7 years in 2016 and 5.75 years in 2015. Up to 73.71% of G-bonds on offer found buyers.

Coupons for all tenors plunged, according to a report on the bond market last year by VCBS.

Winning coupons decreased sharply in the first half of 2017. There were no more concerns over the rising coupon in July thanks to huge capital from the divestment and equitization of State-owned corporations. Abundant liquidity in the interbank market also helped keep coupons low.

Source: The Saigon Times