Floating rate bonds are different than fixed rate notes because they pay out variable coupon interest payments at each period (monthly, quarterly, semi-annually or annually). The amount of these variable payments is determined by issuers or the current market interest rates such as the LIBOR (London Interbank Offered Rate) or Federal Funds Rate (FFR) + a "spread". The spread is a rate that remains constant.
According to financial specialists, this is not a too strange product in the financial market, but recently, many companies have offered this kind of bond to market making more choices for investors, especially in the context that the stock market is going down.
Most recently, Song Da Finance Joint Stock Co (SDFC) finalised offering 500 billion dong of corporate bonds.
SDFC bonds have term of three years with the fixed coupon rate of 13.5 percent pa for the first year. For following years, these bonds will have floating coupon rate basing the average saving rate in dong of 12 month term at four big banks including Vietnam Commercial Joint Stock Bank for Foreign Trade (Vietcombank-VCB), Vietnam Commercial Joint Stock Bank for Industry and Trade (VietinBank), Bank for Investment and Development of Vietnam (Bivd) and Vietnam Bank for Agriculture and Rural Development (Agribank).
Nguyen Lam Dung, general director of VPBank Securities Co (VPBS), the consultant for SDFC's bond issuance, said that before successfully consulting for SDFC's bond issuance worth 500 billion dong, VPBS also consulted for issuing two trillion dong of bonds of VPBank. Thus, VPBS has gained experiences in issuing bonds for large organisations, cooperation and financial institutions.
Apart from SDFC, VietinBank-CTG also announced to issue floating rate bond worth five trillion dong. Accordingly, CTG bonds with term of two years will have the fixed coupon rate of 11.19 percent pa for the first year. The floating coupon rate being based on the average saving rate of 12 month term of four big banks (Vietcombank, VietinBank, Bidv and Agribank) plus amplitude 1.3 percent.year will be applied for following years. The coupon rate will be paid on due date.
Do Ngoc Quynh, general Secretary of Vietnam's bond market commented, the dynamics of the corporate bond market recently is quite positive and the awareness of enterprises on the bond market as a capital mobilisation channel has been raised.
"Previously, bonds were issued mainly by large state-owned enterprises such as Electricity of Vietnam (EVN), Vietnam National Oil and Gas Group (PetroVietnam-PVN). Recently, many other state enterprises specialising in many different fields such as real estate, construction and even large stock companies have been issuing bonds, making the bond market become much plentiful. Understanding and utilisation of capital mobilisation channel through bonds is going good trend, "said Quynh.
According to a financial specialist, floating-rate bond is a "game" at a higher level for issuers and businesses. "They must accurately predict the market trends and have the capacity to control the situation well before any changes in the market," the expert said.
Meanwhile, as for bond buyers, the floating rate bonds will create more attractive and when buying bonds, investors will also feel more secure, because despite the changeable fluctuation of the interest rate market, their rights are also guaranteed
According to financial specialists, this is not a too strange product in the financial market, but recently, many companies have offered this kind of bond to market making more choices for investors, especially in the context that the stock market is going down.
Most recently, Song Da Finance Joint Stock Co (SDFC) finalised offering 500 billion dong of corporate bonds.
SDFC bonds have term of three years with the fixed coupon rate of 13.5 percent pa for the first year. For following years, these bonds will have floating coupon rate basing the average saving rate in dong of 12 month term at four big banks including Vietnam Commercial Joint Stock Bank for Foreign Trade (Vietcombank-VCB), Vietnam Commercial Joint Stock Bank for Industry and Trade (VietinBank), Bank for Investment and Development of Vietnam (Bivd) and Vietnam Bank for Agriculture and Rural Development (Agribank).
Nguyen Lam Dung, general director of VPBank Securities Co (VPBS), the consultant for SDFC's bond issuance, said that before successfully consulting for SDFC's bond issuance worth 500 billion dong, VPBS also consulted for issuing two trillion dong of bonds of VPBank. Thus, VPBS has gained experiences in issuing bonds for large organisations, cooperation and financial institutions.
Apart from SDFC, VietinBank-CTG also announced to issue floating rate bond worth five trillion dong. Accordingly, CTG bonds with term of two years will have the fixed coupon rate of 11.19 percent pa for the first year. The floating coupon rate being based on the average saving rate of 12 month term of four big banks (Vietcombank, VietinBank, Bidv and Agribank) plus amplitude 1.3 percent.year will be applied for following years. The coupon rate will be paid on due date.
Do Ngoc Quynh, general Secretary of Vietnam's bond market commented, the dynamics of the corporate bond market recently is quite positive and the awareness of enterprises on the bond market as a capital mobilisation channel has been raised.
"Previously, bonds were issued mainly by large state-owned enterprises such as Electricity of Vietnam (EVN), Vietnam National Oil and Gas Group (PetroVietnam-PVN). Recently, many other state enterprises specialising in many different fields such as real estate, construction and even large stock companies have been issuing bonds, making the bond market become much plentiful. Understanding and utilisation of capital mobilisation channel through bonds is going good trend, "said Quynh.
According to a financial specialist, floating-rate bond is a "game" at a higher level for issuers and businesses. "They must accurately predict the market trends and have the capacity to control the situation well before any changes in the market," the expert said.
Meanwhile, as for bond buyers, the floating rate bonds will create more attractive and when buying bonds, investors will also feel more secure, because despite the changeable fluctuation of the interest rate market, their rights are also guaranteed
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