HA NOI — Government bond issues must total at least VND1 trillion (US$51.28 million) and mature within three years, under a Ministry of Finance circular issued this week.

"The decision is a very good move by the ministry in both the short – and long-term," Viet Nam Bond Market Association (VMBA) chairman Do Ngoc Quynh told Viet Nam News by phone yesterday. "The regulation of a major bond issue will help structure the chaotic bond market and standardise the market in accordance with global practices."

"The regulation that bond maturity equal at least three years aims to create a better and longer-term capital market alongside the shorter-term capital demand which can be met by banks," said a bond expert at a Ha Noi based foreign-invested bank who asked to remain anonymous.

According to the latest statistics from the VMBA, over 500 bond codes were currently outstanding, each with different maturity, coupon, volume and value. The lowest value of a bond code currently is just VND2 billion (around $100,000).

"That's the most serious problem on Viet Nam's bond market and the one which has caused a lot difficulties in liquidity and setting a standard coupon for the market," Quynh said. "Requiring a major bond issue can handle all of these problems."

Under Circular No 132/2010/TT-BTC, the State Treasury will determine the volume of each tranche of bonds within a single major issue by balancing State budget and market demands.

All tranches of a particular three-year bond issue must be issued within 180 days of the first offering.

Each tranche of a major bond issue would have a fixed nominal yield equal to the winning yield of the first tranche, with the yield payable every six months or once a year.

The head of the State Treasury would determine the yield for additional issues in accordance with Ministry of Finance ceilings. — VNS