Vietnam bond yields rise amid bank liquidity shortage

Vietnam’s government bond yields rose as local banks experienced severe liquidity shortage and had to limit their investments in valuable papers.

Yields on 1-year government bonds on Nov 15 increased to 12.51%, up 0.03% from the previous session, the local newswire DVT.vn reported, citing Bloomberg’s data.

It was predicted that liquidity shortage will threaten both large and small lenders as local residents tend to withdraw their money from banks before the Tet holiday, said Luu Hai Yen, an analyst at Thang Long Securities JS Company.

Moreover, government bonds are becoming less attractive to liquidity-surplus lenders who can lend in the interbank market at much higher interest rates than the bond yields.

Particularly, the average interbank interest rate (VNIBOR) for 12-month term skyrocketed to 36.58% p.a. on Nov 7, much higher than the deposit interest rate cap of 14%.

Interest rates in the interbank market recently cooled down from Nov 7, yet staying high at 20.4% for 12-month and 14.03% for overnight terms on Nov 11.

The State Treasury of Vietnam will open a price competitive auction for VND2 trillion worth of government bonds distributed equally for 3-year and 5-year tenors at the Hanoi Stock Exchange at 14:00 Nov 17.

Source Sophie/ StoxPlus

Tags: Vietnam banking industry, Vietnam bonds, Vietnam finance, Vietnam financial

Posted by VBN on Nov 16 2011. Filed under Banking-Finance. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry