Good times are on the way for Vietnam’s corporate bond market thanks to a sharp decrease in government bond yields and banking interest rates.
“With the anticipation of ticked up credit growth as well as the plunge of lending rates in coming months, we expect the corporate bond market would turn to vibrant mode in the coming time, especially infrastructure sector,” said Vietcombank Securities’ Monthly Fixed Income Report released last week.
A management fund representative said his fund was considering slashing investment in government bonds and raising capital for corporate bonds, due to government bond yields quickly dropping in recent months.
Currently, the government bond yields for two- and three-year terms stayed at 6.55-6.75 per cent per annum, compared with the expected inflation rate of 6 per cent for 2013. Meanwhile, the corporate bond yield remained high at 12-14 per cent per year, for some asset backed issuance.
A monthly report by BIDV’s Treasury Department also forecasted that the corporate bond would be more buoyant in June. “A stable exchange rate, curbed inflation and a liquidity surplus, especially downtrend of interest rate are important factors to support enterprises to issue long-term fixed income debt instruments,” said the report.
At some banks’ treasury departments, bond traders said demands for safe corporate bond deals had increased amid the sharp decrease in government bond yields. Recently, a number of enterprises have announced plans to raise capital via corporate bonds issuances, however, detailed information has not been revealed.
Giants in the real estate sector plans to offer VND950 billion ($45.6 million) of three-year corporate bonds while one big name in the consumption sector is seeking for capitals through bond issuance, with worth of VND2 trillion ($96.1 million) this year and the yield applied for the first payment of 11.5 per cent.
A large state-run bank also plans to issue VND2 trillion ($96.1 million) in corporate bonds with terms of 10 years.
In the first quarter of this year, many big deals had been completed such as Ho Chi Minh City Infrastructure Investment (CII) with VND1 trillion ($48 million) worth of six-year corporate bond issuance that Vietcombank bought wholly with a fixed coupon rate of 13.2 per cent per annum and the country’s largest mining firm Vinacomin with VND2.5 trillion ($119.6 million) worth of five-year bonds with the yield applied for the first year of 14.5 per cent.
However, the corporate bond market stayed quiet with no successful corporate bond issuances recorded in May.
By Nguyen Trang