Vietnam Bank for Social Policies (VBSP) failed to sell any of VND2 trillion ($95.69 million) worth of government-guaranteed bonds distributed equally for three-year and five-year tenors auctioned on the Hanoi Stock Exchange (HNX) on July 30.
This was the seventh consecutive time that the lender has not been able to sell any of offered bonds as bidders sought high interest rates.
Two bidders wanted to buy the notes with expected interest rates ranging between 11.17% and 11.7% per year for 3 year notes and 11.6% to 12% for 5 year bonds but none was the winner.
At the latest auction on July 20, investors asked for lower interest rates of between 10.15% and 11.74% per year , but the auction also failed. Of note, as VBSP continuously failed to sell notes, the expected yield rose again and again.
The demand for government bonds is likely to remain weak in the last months of this year because banks are struggling to boost credit growth to support economy in line with the government’s instruction. Bad debts are also an important reason.
The government is targeting 2% credit growth per month in the second half, Deputy Prime Minister Nguyen Xuan Phuc said in June. Meanwhile, the governor Nguyen Van Binh said the credit growth will be just over 10% this year.
In the first seven months of this year the country’s credit growth rose only 0.93%, according to information released at the government regular meeting on July 31.
However, the yield on the benchmark five-year notes fell four basis points, or 0.04 percentage point, to 9.80 percent in Hanoi, according to a daily fixing from banks compiled by Bloomberg. The overnight interbank deposit rate slid for the eighth day, falling 36 basis points to 1.47 percent, data from lenders show.
The governor Nguyen Van Binh recently said that deposit interest rate could be cut to 8% this year if inflation is tamed at 7%.
The State Bank of Vietnam set the currency’s reference rate at 20,828, unchanged since Dec. 26, according to its website. The dong is allowed to trade as much as 1 percent on either side of the rate.
In the first half of this year, VBSP raised some VND12.6 trillion from government guaranteed bond auctions via the HNX but in July, it could not raise any.