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Wednesday, October 5, 2022

Bond coupons outpace savings rates

By Dung Nguyen

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HCMC – The bond market is showing signs of bouncing back as banks are rushing to hike savings rates.

The Vietnam Bond Market Association (VBMA) said in a recent report that the first half of August saw six private placements worth some VND2.2 trillion, mainly from banks.

The Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) has issued eight-year bonds worth VND1.5 trillion at a floating coupon.

The coupon rate was determined as the average of four state-owned banks of 12-month interest rates plus an interest margin of 0.9%.

After three years, it will be determined as the reference plus an interest margin of 2.57% annually.

With the current annual deposit rate of 5.6%, Vietcombank had to keep its long-term interest rate at around 6.5% annually and then increase it to 8.1% per year.

Viet Capital Commercial Joint Stock Bank is selling bonds worth VND980 billion to the public. The debt, with terms of up to seven years, offers a yearly interest repayment of 8.6%.

According to VBMA, Masan Group Corporation has approved the plan on a public offering of five-year bonds worth VND700 billion. The bonds would pay a yearly interest of 9.5% for the first two terms and then pay variable interest rates for the remaining terms.

Over the past two years, only financial institutes, including banks, securities companies and financial companies, remained active in the corporate bond market.

July witnessed 22 private placements worth over VND18.6 trillion, most of which were issued by commercial banks, VBMA reported.

According to FiinGroup, the coupon rates of corporate bonds issued last month ranged from 4.3% to 7.6%, significantly higher than the average interest rate of the first half of this year at just 4.35%.

Regarding the property sector, only Ha An Real Estate Trading Investment Joint Stock Company issued bonds with an annual nominal interest rate of 11%.

Earlier, FiinGroup’s statistics showed average coupon rates in the half of the year remained identical to last year, standing at 8.8% annually.

The increase in coupon rates may be a signal for market recovery after its long silence.

The corporate bond market has remained quiet since the Tan Hoang Minh Group case emerged in April.

Once the bond market recovers, enterprises can raise funds from the market, especially when banks have tightened control over credit growth due to inflation concern.

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