The pace of Government bond issuance remains slower than planned even though coupon rates are at near-historic lows. What is happening? Should the Government meet its fundraising goal at all costs? Reluctance to raise capital In the first eight months of 2024, the Government issued a total of nearly VND238.3 trillion worth of G-bonds. This figure exceeds the total issued in 2022 (VND214.7 trillion) and is equivalent to 80% of the total issued in 2023 (nearly VND298.5 trillion), indicating that the Government has found this year’s bond fundraising efforts relatively favorable. With economic risks still high and many investment channels unappealing, institutional investors have concentrated their funds on this safe investment channel. Notably, large players in the G- bond market, such as credit institutions, have also continued to pour their capital into this channel. This is particularly true for state-run commercial banks, where credit growth has not met expectations. Furthermore, G-bonds are seen as zero-risk assets when the capital adequacy ratio (CAR) is taken into account. They are highly liquid assets. As banks’ capital grows, their investment in G-bonds is increasing. The same happens to insurance companies, which have limited investment options and prioritize safety, directing most of their funds […]
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