Tuesday, July 25, 2017

Central Bank treasury bonds find a waiting marketplace

Myanmar's central bank has issued new two-year treasury bonds available from January 1. Existing three- and five-year bonds will continue to be sold to the public. And the bonds are already proving a hit with consumers.

The central bank will sell the new bonds to the public through the Myanma Economic Bank (MEB) and Myanmar Securities Exchange Centre (MSEC), said U Soe Thein, executive director of MSEC.

Sales will be from the MSEC and Myanma Economic Bank head office in Nay Pyi Taw, and Myanma Economic Bank branches in Yangon and Mandalay.

The central bank will also sell the bonds to other banks.

The interest rate on the new two-year bonds is 10.5 percent, compared to 11pc for the three-year bond and 11.5pc for the five-year bond, a slight improvement on previous rates, said U Soe Thein. The bonds will be available in denominations of K10,000, K100,000, K1 million and K10 million, with interest payable on March 15 and September 15 of each year. Redemption will be made on the maturity date along with the remaining interest due.

For bonds sold by MEB and MSEC, interest and redemption will be paid by MEB and MSEC on the due dates, said U Soe Thein.

Finance officials hope the new bond issue will enhance investor choice while encouraging the emergence of a bond market in Myanmar, in accordance with the ASEAN goal that all member countries should have a capital market by 2015.

Though the initial rate is less than that offered by savings accounts, officials hope investors will be attracted to its long-term stability as other rates fluctuate, said U Soe Thein.

Though no figure is available for sales to institutional investors, it is known that about 20 individual investors have bought more than K35 million worth of two-year bonds so far, and this is thought to be only a small percentage of sales to institutions.

“Banks like treasury bonds and are buying them. And other investors are also interested and buying.”

Back in 2005-2006, sales of three-year treasury bonds were at K12 billion, trebling to K39 billion in 2006-2007 and almost doubling again to K70 billion in 2007-2008, and then reaching K87 billion in 2008-2009.

As of August 2009, half-way through the current financial year, the figure had topped K53 billion.

For the five-year bond, sales have rocketed from K4 billion in 2005-2006 to K43 billion in 2008-2009. As of August 2009, the 2009-2010 half-year figure was more than K34 billion.

Savings have also risen sharply over the past five years, starting at K730 billion in 2005-2006, then rising to K965 billion in 2006-2007, K1267 billion in 2007-2008 and K1734 billion in 2008-2009, according to the Selected Monthly Economic Indicators published by Central Statistical Organisation.