By David Yong and Veronica Navarro Espinosa
Jan. 26 (Bloomberg) -- Vietnam raised $1 billion from its second global bond sale, offering higher yields than lower-rated Philippines and Indonesia, amid the busiest start to a year for global borrowing by developing nations since 2005.
The Southeast Asian nation’s government sold 10-year bonds to yield 6.95 percent, or 3.33 percentage points more than Treasuries, according to Bloomberg data. Barclays Plc, Citigroup Inc. and Deutsche Bank AG managed the sale. Indonesia paid 2.28 percentage points more and the Philippines gave an extra yield of 1.84 percentage points in sales earlier this month.
Vietnam’s sale raised money for energy and infrastructure projects that will support growth in an economy suffering a shortage of foreign exchange, accelerating inflation and a widening trade deficit. The central bank set a 7 percent limit on the yield, the minimum amount investors AllianceBernstein L.P. and Western Asset Management Co. estimated would be required to attract sufficient orders.
“I like the country and see continuing inflows into emerging markets,” said Francesca di Cesare, a bond manager who helps oversee the equivalent of $10 billion at Aletti Gestielle SGR SpA in Milan and bought the notes. “Vietnam is not a frequent issuer and thus offers a diversification factor.”
Twice Subscribed
Demand for the notes reached $2.4 billion, more than double the amount on offer, said a person close to the transaction who declined to be identified because he’s not allowed to speak publicly. Indonesia’s $2 billion sale this month drew orders for more than twice debt on offer and the $1.5 billion issue by the Philippines was subscribed more than six times. Investors in the U.S. bought 56 percent of the Vietnam notes, while Asian buyers accounted for 28 percent and Europe funds 16 percent.
The 2020 notes were bid at a yield of 6.837 percent, according to prices provided by the Royal Bank of Scotland Group Plc. The benchmark VN Index of shares rallied 3.5 percent to 497.90, the biggest gain in three weeks.
Developing nations from Turkey to Slovenia sold more than $14 billion in overseas bonds so far this year, compared with $24.7 billion at the start of 2005, according to Bloomberg data. Greece yesterday sold 8 billion euros ($11.3 billion) of five- year bonds at premium yields, the first sales since the nation’s debt was downgraded last month by Standard & Poor’s, Moody’s Investors Service and Fitch Ratings.
Increased Volatility
The JPMorgan Chase & Co. EMBI Global Spread was 3.15 percentage points as of 9:20 a.m. in London, up from 2.94 points at the end of last year. Vietnam has a 0.23 percent weight in the index, which tracks the dollar-denominated bonds of 37 emerging-market countries.
Vietnam delayed its debt issue on Jan. 22 because of increased market volatility as global stocks slumped after President Barack Obama unveiled measures to curb risk-taking by U.S. banks. The sale was completed yesterday in New York to yield about a percentage point more than was paid this month by the Philippines and Indonesia, which carry lower debt ratings from S&P.
The bond sale outcome was “important and successful,” opening an international funding channel for the government and businesses, Vietnam’s finance ministry said in an e-mailed statement today.
“The outlook for Vietnam remains constrained by questions around the government’s ability to rein in the fiscal deficit, reduce the trade imbalance and moderate inflation,” analysts at debt-research firm CreditSight Inc. wrote in a report.
Policy Balance
Vietnam is struggling to balance policies that spur growth with efforts to ensure its economy remains stable, said Jan. 15. The nation is rated Ba3 by Moody’s, three levels below investment grade, with a negative outlook. The ranking is on par with the Philippines and one grade weaker than Indonesia. S&P rates Vietnam BB, one level higher than the BB- ranking for Indonesia and the Philippines.
The government sold $750 million of 10-year bonds to yield 7.125 percent at its inaugural sale in October 2005, a premium of 2.56 percentage points over similar-maturity Treasuries. The 2016 notes yielded 6.13 percent yesterday or an equivalent of 3.35 points spread, according to Bloomberg data.
“Investors got nothing” for the additional four years of maturity in the new bonds, said Tim Condon, head of Asia research at ING Groep NV in Singapore. “Nor was there a new issue premium.”
To contact the reporters on this story: David Yong in Singapore at dyong@bloomberg.net. Veronica Navarro Espinosa in New York at vespinosa@bloomberg.net
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