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Banking & Finance

Government bonds struggle in September

Released at: 10:06, 06/10/2015

Government bonds struggle in September

Transactions down against August despite higher interest rates.

by Thu Hoang- Hoang Xuan

The government bond market continued to be subdued in September. Mobilized capital remained modest despite interest rates increasing 0.2 per cent per annum, being equal to 10.3 per cent of bids and calls and falling 66.4 per cent against August.

The Hanoi Stock Exchange (HNX) held 34 auctions of government bonds in the month, mobilizing VND2.6 trillion ($115.6 million). The State Treasury mobilized VND2.5 trillion ($110 million) and the Vietnam Development Bank (VDB) VND125 billion ($5.5 million).

Mobilized total reached just 10.3 per cent of calls and bids for the month, lower than the 26.1 per cent success rate in August. State Treasury bonds reached 16.7 per cent of bids and calls, or VND2.5 trillion ($110 million), out of a tender value of VND15 trillion ($660 million).

The winning rate in the month was quite modest for all terms. Three-year bonds reached 63.2 per cent, or VND2.4 trillion ($105.6 million) out of VND3.8 trillion ($162.7 million). Five-year bonds saw a sales rate of 13.25 per cent, or VND1.6 trillion ($71.7 million) out of VND12.3 trillion ($541.2 million), while ten-year bonds sold just 2 per cent, or VND70 billion ($30.1 million) out of VND3.5 trillion ($154 million). Fifteen-year bonds, meanwhile, saw sales of 15.2 per cent, or VND928 billion ($40.8 million) out of VND5.9 trillion ($259.6 million).

There are high expectations of interest rates rising, but the State Treasury appears in no rush to do so.

In the last week of September the Ministry of Finance (MoF) confirmed that the State Bank of Vietnam provided it with a VND30 trillion ($1.32 billion) loan under a ministry proposal from July.

The loan is a technical measure to handle the State budget deficit and will be repaid during this fiscal year. Analysts view the move in a positive light as the loan will help ease pressure to raise government bonds at any price in the short term. Bidding interest rates in the October auctions are therefore expected to be under little pressure.

Following the trend of increasing interest rates in August, the winning rate on government bonds in September rose slightly, by 0.2 per cent per annum.

The coupon rate ranged from 6.45 to 6.60 per cent per annum on five-year bonds, 6.9 per cent on ten-year bonds, and 7.65-7.9 per cent on 15-year bonds.

Compared with August the winning interest rate on five-year bonds and ten-year bonds rose about 0.2 per cent per annum, while 15-year bonds remained stable.

On the secondary government bond market, the total volume transacted reached more than 361 million, with a transaction value of VND39.4 trillion ($1.73 billion), down 14.7 per cent compared to August.

The total volume of government bonds secured by repurchase agreement (repos) reached more than 276 million, fetching VND27.3 trillion ($1.2 billion), a 31.2 per cent increase in value against August.

The value of transactions for government-guaranteed bonds reached over VND5.2 trillion ($228.8 million), while repos reached over VND4.5 trillion ($198 million).

Outright purchases by foreign investors stood at over VND3 trillion ($132 million) in value while sales transactions totaled VND896 billion ($39.4 million). There was no repos trade by foreign investors in September.

The net purchase by foreign investors in September came after strong net selling in August. Analysts believe this is a positive sign, expressing improved confidence among foreign investors after a poor August performance.

In the secondary treasury bills market, trading volume reached 13.3 million in September, with a transaction value of VND1.3 trillion ($57.2 million). There were not repos transactions in treasury bills.

Government bonds, September

Bond maturity

Number of auctions

Tendering value

Registered value ($)

Winning value ($)

Bid interest

Winning bid interest (%/annum)

3 year


$162.7 million

$105.6 million




5 year


$541.2 million

$622.6 million

$71.7 million



10 year


$154 million

$26.5 million

$30.1 million



15 year


$259.6 million

$93.1 million

$40.8 million





$1.12 billion

$847.9 million

$115.6 million



Source: HNX

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