Banks mobilise to grab dollar bonds

By VietNamNet Bridge
March 22, 2009

VietNamNet Bridge - Dollar-nominated bond issuances are one step closer to reality with banks prepared to withdraw overseas greenback deposits to fund purchases.

With Decision 505/QD-BTC dated March 12, the Ministry of Finance (MoF) has worked out an overall plan for greenback treasury bond issuances with first bidding session to be conducted at the Hanoi Securities Trading Centre (HaSTC) on March 18 valued at $300 million.

However, the bond yield has yet to be decided though local bankers, with internal information, claiming they expect it would be considerably higher than greenback deposit rates.

Vo Thi Sanh, Bank for Investment and Development of Vietnam (BIDV) Treasury Department vice head, said that the bank was processing the withdrawal of overseas greenback deposits.“Our total domestic greenback mobilisation is $1 billion which we have to channel for the major part in overseas banks. Maybe around $100 million will be called back for this week’s bidding,” said Sanh.

A Vietcombank source said that the expected yield for one-year greenback bonds was around 3.2-3.5 per cent per year while the expected level for two and three-year papers should be more than 4 per cent per year.

“Only these yields can attract local institutional bidders,” said the Vietcombank official. At the moment, local lenders are offering 2.0-2.5 per cent per year for greenback deposits with terms from three to 12 months.

In this week’s first bond issuance tranche, the MoF’s State Treasury will offer $100 million worth of bonds with one-year terms, $100 million for two-year and another $100 million for Nguyen Thi Kim Thanh, the State Bank’s Banking Development Strategy Institute head, said that over the last three months, local banks have deposited a large amount of dollars mobilised in Vietnam into overseas markets due to low greenback demand from borrowers.

Over the first two months of 2009, while greenback deposits grew by 1.13 per cent, the total outstanding greenback loans decreased by 2.69 per cent.

Nguyen Thanh Toai, Asia Commercial Bank’s deputy general director, said sometimes greenback deposit interest rates in overseas markets were even lower than mobilisation rates in Vietnam. “But, better something than nothing,” said Toai.

As planned, the MoF will issue the total $1 billion worth of greenback- nominated bond in 2009 for funding foreign currency needs. BIDV’s Sanh said $1 billion was still small compared to the available amount at local banks. “I think the available amount of greenbacks in the banking system originating from public deposits should be around $10 billion. Thus, this issuance would not affect market greenback depository rate,” said Sanh.
VietNamNet/VIR