Take advantage of the favorable market for governmental bond issuance

The State Treasury continues to research and implement solutions to modernize governmental bond capital mobilization. Photo: Thuy Linh

Favorable market conditions

According to the Ministry of Finance, the total mobilization volume from governmental bonds in the first quarter of 2023 reached VND 104,873 billion, equaling 26.2% of the year plan (VND 400,000 billion) and 97.1% of the quarterly plan (VND 108,000 billion).

Statistics of the State Treasury also show that all government bonds are issued by bidding method, with maturities ranging from 5-30 years, mainly 10 and 15-year tenors (accounting for nearly 91% of the total issuance volume). The average annual bond issuance term is 12.68 years; the average interest rate of government bond issuance is 4.19 %/year.

The report on the Ministry of Finance’s work situation in March 2023 said that due to the impact of the market situation, from March 10, the interest rate for government bonds tended to decrease, and the buying demand increased again. (The ratio of bid volume/average volume of bidding packages in March reached 3.39 times, this rate in February was 2.99 times).

Similarly, the State Treasury also said that, following the market situation, the State Treasury had taken advantage of the times when interest rates are low, and the demand for government bonds is high to organize the issue of government bonds with a volume suitable for the high need of central budget expenditure in the first months of 2023 and the great demand for loans from the central budget in 2023. As a result, in the first quarter, interest rates for government bonds increased slightly at the end of February and the first half of March, but in general, the whole quarter decreased again.

Up to now, governmental bond interest rates continue to decrease in both primary and secondary markets. According to experts of SSI Securities Company, the winning rate of government bonds in the primary market remained high, helping the State Treasury to mobilize a large amount of government bonds successfully; Government bond interest rates on the secondary market dropped sharply in all terms after the State Bank’s move to lower the operating interest rate as well as being similar to government bond interest rates in the region.

In 2023, the total loan demand of the central budget is VND 621,015 billion, according to the estimate approved by the National Assembly in Resolution No. 69/2022/QH15 dated November 11, 2022 (including VND 430,500 billion to cover overspending of the central budget and 190,515 billion VND to pay the due principal). Based on domestic and foreign capital mobilization sources, the Ministry of Finance has assigned the task of issuing government bonds in 2023 to the State Treasury at VND 400,000 billion, equal to the original 2022 Government bond issuance plan and nearly 1.9 times higher than the adjusted plan for issuing government bonds in 2022.

It is still essential to implement many solutions synchronously

According to the State Treasury, the mobilization of Government bond capital in 2023 is expected to face many difficulties due to the complicated situation of the world economy. Domestically, economic growth in the first quarter of 2023 was also lower than in the same period in recent years.

Therefore, the State Treasury will continue to closely monitor market developments, central budget collection, plan to repay due principal and the ability to disburse public investment capital to manage the appropriate volume of government bond issuance, ensuring to meet the capital needs of the central budget, including capital needs for the implementation of the socio-economic recovery and development program. In addition, the State Treasury continues to issue government bonds by bidding through the stock exchange, ensuring publicity and transparency.

The State Treasury also said that it would flexibly issue various types of government bonds to harmonize debt repayment obligations between years, ensure the objectives of portfolio restructuring, and reduce the risk of short-term debt reversal of the central budget. Simultaneously, the State Treasury will continue to closely link the mobilization of Government bond capital with the state budget fund management and treasury management to reduce costs and debt risks and enhance efficiency, safety and sustainability of the public financial management system, improving fiscal space.

In addition, the State Treasury continues to research and implement solutions to modernize the capital mobilization from the governmental bond in the direction of the State Treasury Development Strategy to 2030 to diversify government bond products that meet the needs of investors, form standard government bonds; promote the liquidity of the government bond market; increase the ability to mobilize capital for the state budget and support the development of the capital market, strengthen the investor base in the direction of continuing to improve the proportion of long-term investors in government bonds.