Vietnam to issue $1bn additional sovereign bond following November bond sale
Friday, December 26, 2014, 11:11 GMT+7
Vietnam will continue to issue an additional US$1 billion in government bonds to international capital markets with a 10-year term after the successful bond issuance in November this year, the head of the Ministry of Finance said Wednesday in a conference in Hanoi.
To ensure the safety of the public debt, in 2015 Vietnam will not borrow money overseas via other channels, which will be short-term lending at high interest rates, to balance the state budget, Finance Minister Dinh Tien Dung said at the conference held to review the year 2014 and set tasks for the financial sector in 2015.
In early November, the ministry hinted there would be more sovereign bond issuance in the coming time given the advantage Vietnam got from the successful bond sale then.
“The Ministry of Finance will report to the government its ability to issue more sovereign bonds in the future to continue actively restructuring the current debt portfolio,” the ministry said on its official website on November 8 – one day after Vietnam successfully sold $1 billion worth of sovereign bonds with a 10-year term on the international capital market
According to international experts, the Southeast Asian country is seeking to take advantage of its improving credit rating to reduce the cost of borrowing dollars overseas, in the context that the U.S. Federal Reserve is anticipating a rate hike.
"Investors prefer the issuance of bonds listed in U.S. dollars. They are also more concerned about interest rates. Vietnam had been absent for quite some time on the market. The macro-economic situation is stable. All of them are weak factors conducive to the issue," Rajeev De Mello, at asset management firm Schroder (Singapore), told Bloomberg in early November.
The latest bond offering coincided with the bond swaps for sovereign bonds with maturity in 2016 and 2020 previously issued on the international capital market, the Vietnamese finance ministry said.
In addition, total par value registered for the bond swaps which were then accepted was $726.6 million, including $436.5 million and over $290 million worth of the government bonds issued in 2005 and 2010, respectively.
The November bond has reached a fixed interest rate of 4.8 percent a year, lower than the expected 5.125 percent, the ministry said.
This is the lowest rate in the recent sovereign bond issuance. Earlier, the sovereign bonds issued in 2005 and 2010 had an interest rate of 6.875 percent and 6.755 percent, respectively.
According to the ministry, there were 437 international investors subscribed for the most recent government bond offering with a total registered value of $10.6 billion, more than 10 times the amount offered for sale.
The Ministry of Finance also said the success in the issuance of government bonds on the international capital market this time helped set a lower benchmark in interest rates in borrowing overseas, along with the recent adjustment by credit rating agencies Moody’s Investors Service and Fitch Ratings, which upgraded the ratings of Vietnam from B+ to BB-, and from B2 to B1.
Fitch in late October raised Vietnam’s credit rating by one notch to BB-, three levels below investment grade, and government policies have put the Southeast Asian nation’s economy on a more stable footing. Moody’s upgraded the country in July, according to Bloomberg.
|
Favorable time for borrowing overseas The successful sovereign bond issuance in November will create more favorable conditions for other Vietnamese enterprises who want to borrow internationally, as they will find that they can raise capital from international markets at more reasonable interest rates, the Vietnamese finance ministry said. The ministry added that the issuance of the government bonds may also reduce the risk of re-financing and interest rates for the foreign debt portfolio of the Vietnamese government. According to the Ministry of Finance, the issuance of government bonds in 2014 was considered successful when the release rate is lower than expected, saving about $32.5 million in interest payments for the government for in the next years. The issuance also swapped 54.4 percent of the original value of international bonds issued in 2005 and 25.4 percent of the original value of international bonds issued in 2010 for a total benefit of $13.9 million. This contributes to the restructuring of public debts by stretching the loan term and reducing pressure on debt repayment obligations in line with the direction of the government, the ministry said. |
Like us on Facebook or follow us on Twitter to get the latest news about Vietnam!
