Bonds and certificates of deposits (CDs) are the most commonly issued debt instruments, which also include bills, notes and commercial papers.
The HCM City Development Commercial Joint Stock Bank (HDBank), for example, issued on July 24 short-term certificates of deposits in Vietnamese dong and the US dollar with a total issuance face value of more than VND5.4 trillion and $20 million for economic organizations and credit institutions.
The bank's CDs have a minimum face value of five million dong or US$100, with an attractive coupon rate and bonus incentives.
Short-term CDs allow customers to make pre-mature withdrawals at any transaction office belonging to HDBank.
In addition, customers do not receive principal and interest when due. The interest is included in the principal, and HDBank will switch to term-savings with the interest received at the end of term.
According to its announcement notice sent to customers, Maritime Bank also plans to issue CDs in dong with a combined face value of VND2 trillion ($95.2 million). The bank's two-year-term CDs have a total face value of VND1 billion ($48,000), with both fixed and floating interest rates.
Although the Joint Stock Commercial Bank for Investment Development of Vietnam (BIDV) is planning to sell international bonds of a total value of VND10 trillion ($476 million), it is still selling nearly VND1 trillion worth of bonds to domestic investors. This kind of bond has a floating interest rate and term between two and three years.
Also, PetroVietnam Financial Corporation plans to mobilize VND8 trillion ($380 million) from the issuance of debt instruments. Of that amount, VND5 trillion ($238 million) is expected to be raised from the issuance of CDs and VND3 trillion ($142.8 million) from convertible bonds.
Market analysts said that many organizations and credit institutions have been interested in bonds and CDs as a way of generating long – and medium-term capital. Many credit institutions are in great need of long – and medium-term capital to prepare for credit activities that are expected to increase at the year-end.
A leader of a major State-run bank, who declined to be named, said that the fixed-income money market (also called the debt-instrument market) was competitive since many commercial banks want to issue debt instruments.
The bank official said the issuance of debt instruments comes at a favorable time. The deposit interest rate has fallen, while the interest rate of debt instruments has also been cut significantly (the rate of enterprise bonds were slashed from 18 and 19 per cent per year to 12 and 13 per cent).
Additionally, a recently issued policy of the central bank that aims to lift the ceiling deposit interest rate of long – and medium-term deposits has also encouraged credit institutions to participate in the enterprise bond market since the competitiveness of bonds among enterprises has improved.
A foreign senior economic expert also said that the cutting of interest rates had prompted commercial banks to issue more bonds and CDs to generate capital.
However, many investors are still worried about risks and liquidity that may arise from buying bonds and CDs.