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Foreign investors net buy VND8.4 trillion of G-bonds
Hong Phuc
Thursday,  Mar 23, 2017,01:10 (GMT+7)

Foreign investors net buy VND8.4 trillion of G-bonds

Hong Phuc

HCMC - Foreign investors are net buyers of Government bonds in Vietnam, with their net purchases amounting to some VND8.4 trillion since the beginning of the year.

Market factors have remained favorable for foreign investors’ net purchases of G-bonds. Last week, they net bought VND1.33 trillion of the debt paper on the secondary market, with over VND1.73 trillion purchased and VND403 billion sold.

Foreigners’ net buying of Government debt has picked up since last year when international financial institutions marked a year of constant net purchases with the highest volume ever on the secondary G-bond market.

Even though the transaction volume of foreign investors is not too large compared to the total trading value of the bond market, this marks a big change in the debt market.

Government bonds are still attractive to foreign financial institutions because they are a stable and reliable investment vehicle, with returns higher than other types of investment at home and abroad.

Although bond yields on the secondary market fell slightly last week, they have stayed attractive in comparison with other investments. Specifically, the yield is now 4.01% per year for bonds with a term of one year, 4.574% for two years, 4.75% for three years, 5.084% for five years, 5.49% for seven years, 6.126% for 10 years and 7.082% for 15 years.

Financial institutions have forecast the coupons for G-bonds may fluctuate slightly this week and next.

Since early this year, the State Treasury of Vietnam has sold VND46.88 trillion of Government debt, meaning this agency would have to issue an additional VND18 trillion of debt before the end of the first quarter to realize the target.

Financial institutions suspect the goal could be reached as there are only two more bond auctions before the end of this quarter but the volume to be issued remains huge.

The National Assembly Standing Committee on March 21 began looking into the draft of the amended Law on Public Debt Management. Lawmakers proposed not including debt owed by the central bank and State-owned enterprises in public debt.

In case SOEs fail to pay off their debts, they will have to file for bankruptcy under the law. This would be a major change for Vietnam’s public debt and debt market.

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