After companies, it is now the turn of banks to issue bonds to take advantage of the low interest-rate regime to raise funds and also, in some cases, increase Tier II capital to achieve capital adequacy.

Bond coupon rates now stand at very low levels. Interest on government bonds have fallen by 110-120 basis points (100 basis points equal 1 percent) since early this year to 5.6 percent for those with a two-year maturity, 6.1 percent for three-year bonds, and 7.1 percent for five-year bonds.

Ho Chi Minh City Development Commercial Joint Stock Bank (HDBank) plans to issue three-year bonds to a group of individual investors, according to its preliminary prospectus.

This is part of the bank's plan to raise a total of 1.4 trillion VND (66.35million USD) this year to augment its long and medium-term funds to meet companies' credit needs.

Two major State-owned banks are also completing procedures to issue bonds.

One of them plans to issue five-year bonds worth 2 trillion VND (94.78 million USD). The other will issue 10-year bonds that will increase tier II capital and improve its capital adequacy ratio (CAR).

Early this year the Investment and Development Bank of Vietnam (BIDV) had revealed that it was considering an issue of bonds to increase its tier II capital to achieve CAR stipulated by international norms.

Analysts said one of the above bond issues would carry a coupon of only 7.5 percent, just 1.4 percent higher than the rate on government bonds with the same maturity.

In the past the gap used to be much bigger.

Just last October HDBank issued three-year bonds at 10.5 percent interest, which was 3-3.5 percent higher than that of comparable government bonds.

Some medium-sized banks plan to issue bonds at 2 percent higher than government bonds.

Banks' bond issuance is starting earlier this year than last when the first issue only took place in August.-VNA