The buybacks of corporate debt securities increased and a large amount of bonds was repurchased by banks before maturity, local newspaper Vietnam News reported, citing a recent report by a local security company.
In the second quarter of 2023, nearly 62.54 trillion Vietnamese dong (2.6 billion U.S. dollars) of bonds were bought back in advance, up 76.8 percent compared to the previous quarter and 4.9 percent over the same period last year, according to the report by VNDIRECT Securities Company.
In which, banks bought back 63.7 percent of the total value, equivalent to 39.84 trillion Vietnamese dong (1.7 billion U.S. dollars).
The main motivation for banks to buy back bonds before maturity was low credit demand, sharply dropping deposit interest rates and abundant liquidity of the banking system in the first months of this year, the newspaper said, citing the company's analysts.
With credit growing by a modest 3.13 percent as of June 20 this year, the lowest level in the past 10 years, banks found themselves sitting on mountains of cash. In an attempt to reduce capital redundancy and optimize capital efficiency, banks had little choice but to buy back bonds. As the demand for loans in the economy remained woefully low, banks used their excess money to step up bond buybacks.
The buybacks of bonds that have yet to fall due was seen as a suitable strategy in the first months of this year. However, for the remaining months of this year, experts are concerned that the buybacks of long-term bonds, if continued, will adversely affect the banks' ability to supply capital for production and business, and boost their lending, the newspaper reported.
Experts explained that many forecasts show that credit demand will be stronger in the second half of this year due to the recovery of the economy. Banks therefore need to have enough capital to meet loan demands of firms and individuals, it said.
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