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Overseas bond issue raises $1bil at 6.95% yield   2010-01-27 - Viet Nam News

An overseas offer of Government bonds has raised US$1 billion at a yield of 6.95 per cent per year, with the bonds to be listed on the Singapore Stock Exchange, the Ministry of Finance has announced.

Offers for the bonds totalled as much as $2.4 billion, according to a report from Bloomberg.

"If the information is true, the volume again suggests that Viet Nam has a prospective outlook in the eyes of investors," a member of the National Consulting Council for Monetary Policy told Viet Nam News, on condition of anonymity.

The yield, however, was 3.32 percentage points higher than US Treasuries and a percentage point higher than the two recent bond issues by the Philippines and Indonesia, both are very active debt issuers in the region with lower debt ratings from Standard&Poor's.

Moody's has also rated Viet Nam Ba3, three levels below investment grade.

Some experts suggested that Viet Nam had to pay the higher yield due to global investors concern over Viet Nam's current fiscal and monetary situation and doubts whether the Government would be able to meet inflation, budgetary and current account deficit and growth targets.

The National Assembly has estimated that the budget deficit would rise to 6.2 per cent of GDP in 2010, up from 6 per cent last year, although a number of economists have predicted that it would reach 10 per cent. Meanwhile, the trade deficit was expected to widen from over $12.2 billion last year to $14.5 billion in 2010.

"Given the current situation, why was the demand more than double the amount on offer?" asked an official from the State Securities Commission who also requested that his name be withheld. "It may simply be because Viet Nam weathered the crisis rather well and posted a 5.3-per-cent economic growth, something many countries couldn't achieve."

"Viet Nam might have drawn some lessons from the yields in domestic bond sales," commented a HCM City-based economist. "The latest issue of VND3 trillion in Government bonds on Monday did not attack a single investor. The situation was blamed on a yield capped at 11 per cent, nearly the same as the interest rate for bank deposits in Vietnamese dong."

Francesca di Cesare, a bond manager with Aletti Gestielle SGR SpA in Milan, told Bloomberg, "I like the country and see continuing inflows into emerging markets. Viet Nam is not a frequent issuer and thus offers a diversification factor."

Capital raised from the bond issue will flow to PetroVietnam, Vinalines, Song Da Corporation, and Viet Nam Machine Erection Corporation (Lilama) to invest in Dung Quat oil refinery projects, hydro-electric power projects and to purchase vessels.

According to Bloomberg data, developing nations from Turkey to Slovenia sold more than $14 billion in overseas bonds this year, compared with $24.7 billion at the start of 2005.

Viet Nam first issued bonds overseas in 2005, selling $750 million worth, with a 2016 maturity date and 7.125 per cent yield. Then, the US prime rate was 5.2 per cent and Viet Nam's national debt margin was about 2 per cent. The bonds are now trading on the after-market at 6.1-6.3 per cent per year.

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