Vietnam: Government bond yields ease on higher demand: economists

by **ADMIN** Tue Jun 21, 2011 8:34 am

Government bond yields have eased as demand for Government bond yields are mounting, the local newswire Thanh nien reported June 20, citing economists’opinions.

Trinh Hoai Giang, Vice Chairman of Vietnam Bond Associations pointed out that higher demand for Government bonds can be explained by three main reasons: inter-bank interest rates have recently plunged; a huge volume of issued Government bonds came due, giving big banks an abundant source of capital for investment; and banks’ credit growth almost reached the cap of 20% in 2011, encouraging them to pour capital into Government bonds.

Le Tham Duong, Head of Business Management at Ho Chi Minh city University of Banking said it’s too soon to confirm local lenders’ abundant source of funds, yet part of their capital is seeking ways out.

Government bonds are always risk-free, Duong pointed out, adding that local banks holding Government bonds still ensure capital flexibility and liquidity as they could sell or discount bonds on open market operations .

Yields of long-term Government bonds are lower than those of short-term ones, reflecting primary investors’ expectations about cooling down inflation, local media added.

In June, Government bond auctions in Hanoi stock exchange have been successful in which 100% bonds were sold out, and bond yield fixings dropped after surging as high as 13.3% p.a. in late May.

Inter-bank interest rates have recently eased, ranging between 13% p.a. and 15% p.a. during the last few weeks, paving the way for interest rates to cool down, experts said yet warning that CPI and the SBV’s policies should also be taken into account.

http://vietnambusiness.asia/government-bond-yields-ease-on-higher-demand-economists/