Vietnam starts selling $1bn bond

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26 January 2010

Vietnam starts selling $1bn bond

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Vietnam has launched a $1 billion 10-year bond at a yield of 6.95 percent, at the lower end of initial guidance, and pricing is expected later in New York, reported VNBusinessNews.com, citing a source at one of the arranging banks.

The sale is the country's second foray into the global debt market since a maiden $750 million sale in 2005. The government plans to use the proceeds to fund key state-owned projects.

The bonds were expected to be priced last Friday, with a source saying the deal had received more than $1 billion in orders, while an unofficial yield guidance of around 7 percent had been set.

The delay prompted speculation that the deal was having some problems, as the overall market condition turned sour last Friday, as Asian bond spreads widened to six-week highs.

Vietnam said initial yield guidance of 6.95-7.0 percent in Asian trade, sources said.

"The current price talk is quite aggressive, given the inflationary pressure and many structural reforms that the country needs to do," said Arthur Lau, portfolio manager at JF Asset Management in Hong Kong. "In addition, I think the overall sentiment remains very cautious."

Vietnam was the third Asian sovereign issuer in the global bond market this year, after Indonesia and the Philippines, two of the region's most active dollar debt issuers.

Indonesia sold $2 billion worth of 10-year bonds at a yield of 6 percent, while the Philippines issued $650 million of 10-year bonds at 5.674 percent.

"Fundamentally, Indonesia and to a lesser extent the Philippines, are better credits than Vietnam," said Tim Jagger, Asia-Pacific head of credit strategy at Royal Bank of Scotland in Singapore. "Vietnam had a devaluation in the not so distant past. That is something to be mindful of."

Vietnam in November devalued the dong, its third since June 2008, and narrowed the trading band in a bid to ease the currency's depreciation.

Vietnam was rated BB by Standard & Poor's with a negative outlook, while Indonesia and the Philippines were both rated BB-minus, with positive and stable rating outlooks, respectively.

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