Mobilise Government bonds in 2021: Flexible term, stable interest

Government bond issuance will continue to be one of the key task of the State Treasury in 2021

Target of mobilising VND 350 thousand billion in 2021

In Resolution No.128/2020/QH14 on the State budget estimate in 2021, the National Assembly has approved a total loan rate of the central budget in 2021 of approximately VND 580,000 billion. The borrowing task of the Government through GBI in the domestic market is assigned to State Treasury with the amount of VND 350,000 billion by the Ministry of Finance.

Based on the evaluation of investors’ demand and balancing the annual debt repayment structure of the State budget, with the goal of continuing to restructure the Government's debt portfolio, the State Treasury has announced an issuance plan of Government bonds in 2021, which will allocate volume for each type of term. The volume for five-year term is VND 20,000 billion; seven-year term is VND 15,000 billion; 10-year term is VND 120,000 billion; 15-year term is VND 135,000 billion; 20-year term is VND 30,000 billion and a 30-year period is VND 30,000 billion.

According to the State Treasury, in the process of operating the market, depending on the demand on capital of the State budget and demand for bonds from time to time, the State Treasury can adjust the appropriate term structure, ensuring sufficient capital mobilisation for the State budget in accordance with the plan as announced.

To ensure market continuity, the State Treasury has published the bidding schedule for Government bonds on the websites of the Ministry of Finance, the State Treasury and the Stock Exchange. At the same time, the State Treasury organised bidding to issue Government bonds from the beginning of the year to supply goods to the trading market. According to the latest report, as of March 3, 2021, the total volume of Government bonds issued in 2021 is VND 27,821 billion, the average issuance term in 2021 reached 14.39 years and the average bond issuance interest rate in 2021 is 2.32% per year.

According to the State Treasury, the amount of mobilised capital through Government bonds in recent years has helped the State budget have enough source of balanced capital to spend on key projects and works in the socio-economic development investment plan of the country. Besides that, this capital also helps the financial market operate stably and affirms the important role of the government bond market as an effective capital mobilisation channel of the State budget. Especially, with long term loans, low interest rates, borrowing Government bonds helps to save significantly the borrowing costs of the state budget, increase the efficiency of State budget management and public debt management.

Building flexible Government bond term

If in 2020, the State Treasury mobilised more than VND 333 thousand billion of government bonds (98.2% of the plan), the task of 2021 will be even heavier with the goal of mobilising VND 350 thousand billion. For this task, the State Treasury has set three central goals.

Firstly, to complete the capital mobilisation plan through the issuance of Government bonds in 2021, fully meeting, appropriate with the debt repayment plan of the State budget and the disbursement progress of public investment capital. Secondly, continue to restructure the Government debt portfolio through diversified issuance of Government bonds, harmonise the debt repayment obligations of the State budget between years, and reduce the risk of short-term refinancing of the State budget and Government bond market development. Third, closely linking public debt management, State budget management and state fund management to improve management efficiency and save borrowing costs for the State budget.

Also according to the State Treasury, the issuance of Government bonds of the State Treasury, besides the need to fully meet the capital source for the State budget, is also required to link capital mobilisation with the disbursement progress of public investment capital, ensuring the loan is used wastefully, increasing the efficiency of loan use, efficiency of public debt management. In addition, the issue of Government bonds must be in line with investors’ demand in the market, maintain the amount of goods for the trading market and the Government bond market to become a standard and reference market for other capital markets.

To achieve the targets as set, the State Treasury will continue to closely monitor changes in the financial and monetary market and manage the volume of bond supply to the market in accordance with the needs of investors and fully mobilised VND 350,000 billion (including issuing Government bonds for social insurance), maintaining the bond market with full commodity, operating regularly and continuously, being an effective capital mobilisation channel of the State budget at all times. The bidding for Government bonds issued by the State Treasury will continue to be done weekly through the Stock Exchange with simple, public and transparent procedures.

In the coming time, the State Treasury will deploy the issuance of standard bonds for market makers to fulfill their commitment to offer a firm commitment price in accordance with Decree No. 95/2018/ND-CP dated June 30, 2018 of the Government to increase liquidity for the Government bond market.