Investors return to bond market

The lacklustre bond market has in recent times turned attractive to institutional and foreign investors given an improvement in macroeconomic indicators.

Dinh Nhu Duc Thien, head of the analysis department of Empower Securities Co (EPS), said investors, especially foreigners, had begun returning to the bond market as the economy was stabilising.

Corporate bonds usually yield 17%-18% while the government bond yield ranges from 15% to 16.5% per year. Bonds are a safe investment channel and its yield relies on the country's economic stability.

Le Duc Tho, head of the investment department of Bank for Industry and Trade of Viet Nam (VietinBank), said the bond market was luring back investors who were confident in a recovery of the economy and the government's inflation control measures.

It is quite different from late May and early June when there was almost no interest in bonds, he said.

In May, the consumer price index (CPI) rose 3.91%, the highest month-on-month rise, so government bonds had declined, even below face value. Then the government bond yield ranged from 24% to 26% per year, meaning the bond price was low.

However, the bond yield has fallen to 15%-16% this time around thanks to good news on the CPI and trade deficit. A year ago, the bond yield was 8.5%-8.7%.

Tho said that if the inflation was put under control, the bond yield would decline further in the future but the current level would stay unchanged until 2009 and early 2010. (SGT)