Vietnam sold 10-year sovereign bonds denominated in U.S. Dollars, as the country seeks to reduce its cost of borrowing to record lows and refinance its existing debt that was issued at lower rates over the past several years.
Sources close to the matter say that Vietnam rose around US$1 billion and that the bonds will yield 5.125% interest. The issuance comes just a few days after Vietnam’s credit was upgraded by Fitch from “B+” to “BB-“ – three levels before investment grade. Fitch mentioned faster growth, greater stability, and better financing ability as reasons for its decision. Moody’s also raised the country’s rating for the first time since 2005 from B2 to B1 this July.
Vietnam does not usually offer its debt to international investors, and this marks its first sale of bonds on the global market in almost five years. Analysts say that the nation’s recent credit upgrade, along with anticipation that the end of the United States’ quantitative easing will send interest rates higher are the main factors in Vietnam’s rare issuance.
Bankers said that the sale attracted great interest from investors in emerging markets due to the the scarcity of the country’s debt, the high yield, and a better outlook on the Vietnamese economy.
“The search for yield is still there. We haven’t seen Vietnam for a while in the market. The macro situation in Vietnam has stabilized. All those factors will be good for this issue.” said Rajeev De Mello, head of Asian fixed income at Singapore-based Schroder Investment Management.
Vietnam’s tender cash offer for outstanding bonds is US$1,070 for every US$1,000 of 2016 notes, and US$1,140 per US$1,000 of 2020 notes. Priority will be given to investors switching into the new issue. Lead arrangers for the refinancing are HSBC Holdings, Standard Chartered, and Deutsche Bank.