Vietnam said to price bonds at 6.95% to 7%

Vietnam plans to sell as much as $1 billion of 10-year bonds today, offering a yield of between 6.95 percent and 7 percent, according to an e-mail arrangers sent to investors today.

The sale will be priced today New York time, according to the e-mail. The yield to sell 2020 debt is about a percentage point higher than offered this year by the Philippines and Indonesia, which carry lower debt ratings than Vietnam from Standard & Poor’s.

AllianceBernstein L.P. and Western Asset Management Co. last week said Vietnam needed to offer at least 7 percent as the government struggles with a currency trading near a record low, accelerating inflation and a widening trade deficit. The offering adds to $13 billion of global debt sales by developing nations so far this year, the most since 2005, data compiled by Bloomberg show.

“With the correct pricing, it will be something that’s kind of enticing to investors,” Nancy Koh, director of Asian corporate research at BCP Securities Asia, said in a Bloomberg TV interview today in Singapore.

Vietnam delayed the pricing from Jan. 22 because of increased market volatility after President Barack Obama unveiled measures to curb risk-taking by U.S. banks, handing emerging-market debt investors the first weekly loss this year. The JPMorgan Chase & Co. Emerging Market Bond Index Plus fell 0.6 percent last week, the most since October.

Market Stabilizes

The spread between yields on emerging-market debt and U.S. Treasuries narrowed five basis points to 2.97 percentage points as of 11:45 a.m. in Singapore, according to the EMBI+.

Vietnam’s government is struggling to balance policies that spur growth with efforts to ensure its economy remains stable, Moody’s Investors Service 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 Philippines sold debt due 2020 at 5.67 percent on Jan. 7 and Indonesia offered similar notes at 6 percent on Jan. 13. Barclays Capital Plc, Citigroup Inc. and Deutsche Bank AG are managing the sale.

Vietnam sold $750 million of 10-year bonds to yield 7.125 percent at its first global bond sale in October 2005, a premium of 2.56 percentage points over similar-maturity Treasuries.

Not the Best Day

The planned sale, the second ever dollar debt issuance for Vietnam, comes amid concern monetary tightening in China will cool demand for high-yielding assets. Vietnam’s central bank said on Jan. 19 that the Finance Ministry would determine an appropriate time for the issuance “as long as the interest rate for the 10-year bonds doesn’t exceed 7 percent per year.”

The central bank devalued the dong by 5.4 percent last year as the trade balance recorded a $12.25 billion deficit for all of 2009 after a first-quarter surplus. The dong is trading at 18,469 per dollar, near a record low of 18,500 reached in November. Consumer-price gains quickened to 6.52 percent in December from a year earlier, compared with 4.35 percent in November.

“Vietnam has current-account problems, not to mention that they have just devalued the currency last quarter,” said Paul Chan, Hong Kong-based chief investment officer for Asia excluding Japan at Invesco Asia Ltd. “I’m not sure if the extra yield at 7 percent justifies the investment.”

Invesco doesn’t invest in the country or plan to buy the bonds, Chan said.