RongViet Securities Corporation (VDSC) just reported on the “strange sign” of the issuance of government Bonds when the bidding value fell sharply in the second quarter and went against the issuance plan.
Specifically, in Q2/2019, Vietnam State Treasury (VST) successfully mobilised 35.6 trillion dong, very low compared to the plan of issuing 80 trillion dong previously. In the first six months of the year, VST raised 105 trillion dong, equivalent to 70 percent of the plan.
According to VDSC, low winning rate was the result of VST’s initiative to reduce the scale of bidding during the last quarter. Bidding ratio/issuance plan only reached 0.6 times, the lowest level in the last three years. The last time this rate fell below the one-time threshold was the time of Q3/2017, reaching 0.8 times.
Experts believed that the slow progress of public investment disbursement led to stagnant government bonds in the system of commercial banks.
According to data from general Statistical Office of Vietnam (GSO), the growth of state investment capital in the first six months of 2019 only reached 2.1 percent compared to the end of last year, the lowest level in recent years. Investment capital from government bonds decreased by 14 percent compared to the end of 2018 while investment capital from the state budget accounted for the highest proportion, only 3.7 percent.
Recently, the National Assembly has approved the Law on Public Investment (amended) to address bottlenecks in the implementation process and expects to promote key infrastructure investment projects. In addition, in Q3/2019, 3/11 sections of the North-South expressway project will be started. Therefore, VDSC expects disbursement of public investment will be more positive since 2020.
Besides, the state budget revenue and expenditure situation in the first six months of 2019 also reduced the pressure of debt through issuing government bonds. The total state budget revenue reached 660.6 trillion dong while the total expenditure was only 612.5 trillion dong. Income tax and import tax were the main contributors, but in terms of development investment expenditures, tax revenues only reached 26.1 percent of the yearly estimate.
In the context of the large amount of stagnant bond capital and the budget surplus in six months of 2019, the initiative to reduce new issuance will help to limit the pressure of increasing government bond interest rate. In addition, reducing the issuance of government bonds also limits the dispersion of capital flows when the mobilisation from banks and large investors for government bonds is slowing down.
By June 18, deposit growth was only 6.1 percent, lower than 7.8 percent of the same period last year while the money supply growth rate was 6.1 percent (8.08 percent in the same period of 2018). Meanwhile, credit growth reached 6.2 percent, higher than 6.1 percent in the same period of 2018.
Notably, VDSC said that there was a shortage of liquidity in the interbank market and the open market last week. In the interbank market, overnight interest rate increased rapidly, surpassing the four percent threshold while the lending volume also peaked at 90 trillion dong per session compared to the average of 50 trillion dong per session.
