Last week’s unremarkable bond auction was acceptable for the issuer in taking with one step closer to the annual issuing target.
Investors’ employment of the barbell strategy could pay dividends On July 15, the State Treasury offered VND1.5 trillion ($78.9 million) worth of five-year papers. Tenders placed total bid of VND2.3 trillion ($121 million) at coupons from 10.1 to 11.0 per cent, per year. However, only VND550 billion ($28.9 million) was taken at rate of 10.3 per cent, per year.
Last week’s auction for five-year bonds was just an additional offering following on from the previous session on July 2 where the issuer sold VND950 billion ($50 million) worth of five-year paper out of VND1 trillion on offer at coupon rate of 10.4 per cent, per year. The State Treasury also sold all VND1 trillion ($52.5 million) worth of five-year paper at 10.95 per cent, per year on June 21.
After a series of failed auctions and underwritings for 10-year treasuries in the primary market, in the calendar there are no more offers of 10-year government bonds in upcoming sessions.
Nguyen Tan Thang, Ho Chi Minh City Securities Corporation’s head of fixed income research, said the Ministry of Finance may be anticipating a further reduction in long-term yields as observers still see demand at these tenors.
He added that much of recent demand in the government bond secondary market happened as investors applied a “barbell strategy”. This hopes to capture yields at the long end, whilst buying liquidity insurance at the short-end. “Investing in the long-end of the barbell allows them to lock in attractive long-term yields while buying at the very liquid short end allows for a quick exit should the bond market cycle turn,” said Thang.
In the first half of 2010, Vietnam’s balance of payment recorded $3.44 billion surplus and according to the State Bank, a sum of $1.8 billion was injected in to local stock market.