Commercial banks’ demand for Government bonds started to increase thanks to an excess in liquidity in the system.

The State Treasury announced it sold a large amount of two year bonds without increasing bond yields.
In its two auctions in August, it sold 1.75 trillion VND (82.5 million USD) bonds with 7 percent interest rate, the same as in late July.

On the secondary market transactions earlier this month improved nearly 100 percent compared to late in July, hitting 5.7 trillion VND (268.8 million USD).

Although transactions focused on bonds of short terms (one to two years), it has shown that banks found government bonds attractive again. Banks are the main buyer of bonds.

In July, bonds auctions almost failed because banks wanted to bid at high yields while the Ministry of Finance tried to keep rates low. In August, however, banks bought regardless of bond yields.

In fact, the return of investors to bonds was predicted by the Bank for Investment and Development of Vietnam. As the stock market declined, the bank said, demand would come to bonds as bank liquidity improved and the economy had not signaled prosperity.

Foreign investors also contributed to the rally of bonds. After unloading a net value of 10 trillion VND (471.7 million USD) in June and July, as of August 9, they were net buyers with 204 billion VND (9.6 million USD).-VNA