Also at the trading session, the 10-year and 15-year bonds had interest rates of 4.43 percent and 4.73 percent, respectively. 

The interest rates showed an upward trend if compared with the 2.97 percent, 4.15 percent and 4.5 percent for 5-year, 10-year and 15-year bonds, respectively, fixed at the bid two months before, on May 2. 

According to HNX, from the beginning of the year to July 2018, the State Treasury mobilized VND80.901 trillion worth of capital through bond bidding, just fulfilling 40 percent of the yearly plan and decreasing by 70 percent compared with the same period last year.

The disbursement still has been going slowly, but the State Treasury wants to issue a high amounts of bonds, mostly to ‘neutralize’ the short-term bonds issued previously with high interest rates. 

The government’s debts in domestic bonds now have longer mature terms and lower interest rates.

However, analysts warn that cash flow is moving unreasonably, with latent risks for implementation of monetary policies.

The major buyers of government bonds are commercial banks. In principle, they only pour money into bonds if their liquidity is abundant and their capital mobilization cost is low enough to bring profits.

A question has been raised about why commercial banks are still attending bond auctions when the bond interest rates are lower than their capital mobilization costs.

The main reason is that banks now have too much money. As the disbursement for public investment has been going slowly, the State Treasury has to deposit undisbursed money at banks.

A report shows that by the end of 2017, the total deposited amount had reached VND293.5 trillion, including the VND165.082 trillion at Vietcombank as shown in the bank’s audited finance report.

As of the end of the first quarter of 2018, the deposits at the bank had fallen by VND40 trillion, but had grown immoderately at others.

The cash is ‘moving around’ but it doesn’t flow to production and business.

Experts warn that banks are bearing risks. They use the capital mobilized through short-term deposits (6-12 months) to buy long-term 10- or 15-year bonds.

The banking sector now has to arrange capital for the national economy, while the budget’s expenditure on development and investment is shrinking.

However, banks’ capabilities are limited. Meanwhile, bad debts still have not been fully settled. Banks have begun tightening credit. Four state owned banks have been instructed to reduce the credit growth rate by one percent this year compared with 2017.

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Mai Chi