Corporate bond rates far higher than deposit rates

Over the last two months, Phat Dat Real Estate Development JSC has issued four bonds, with the highest annual interest rate reaching 14.45%.

Similarly, Khang Dien House Trading and Investment JSC has offered two-year bonds valued at VND450 billion (US$19.3 million), with an annual interest rate of 12%, while Van Phu-Invest Investment JSC has issued VND800 billion in over-three-year bonds, with an annual interest rate of 12%.

VNDirect Securities Company has also launched VND1.46 trillion worth of one- to three-year bonds with annual interest rates ranging from 6.5% to 11.3%.

Meanwhile, banks have offered interest rates for savings of only 4%-8.9%.

According to Military Bank Securities Company, since early this year, more than VND60 trillion worth of corporate bonds have been issued, and those issued by banks and securities and property companies account for up to 82%.

Specifically, banks issued VND17.6 trillion worth of bonds; real estate firms, VND16.2 trillion; and securities companies, VND15.8 trillion.

Dr Bui Quang Tin from the Banking University of HCMC said corporate bonds have become increasingly attractive to investors thanks to their high interest rates. The corporate bond market remains small, so the issuance of bonds with interest rates of 12%-14.5% has yet to have a significant impact on banks’ operations.

However, commercial banks have tightened credit for sectors bearing high risks such as real estate and securities, which may result in more corporate bond issues, affecting banks’ capital mobilization.

He added that corporate bonds should be listed on stock exchanges to ensure transparency and reduce risks for investors.

According to Dr Le Xuan Nghia, former vice chairman of the National Financial Supervisory Commission, the interest rates of corporate bonds are not too high in terms of the capital cost. Enterprises have to be subject to annual lending rates of 12%-12.5% for medium- and long-term loans charged by banks.

Property firms find it hard to access bank loans, while they have high demand for capital to execute projects, so they must issue corporate bonds with attractive interest rates, Nghia added.