VN Central Bank’s $12 billion worth of US govt bonds not a surprise
Indonesia, Thailand and Malaysia, with forex reserves many times bigger than Vietnam’s, only invest 10 percent of reserves on US government bonds. Meanwhile, the proportion is 30 percent for Vietnam.
If comparing with other ASEAN countries, the proportion is the same as Malaysia’s and equal to 2/3 of Thailand’s and Indonesia’s investment value.
Singapore invests $109 billion on similar items, while the Philippines has poured $41 billion into the same type of assets.
According to IMF (International Monetary Fund), Vietnam’s forex reserves by the end of 2015 had reached $30 billion, while the figure might have increased to $34 billion by the end of the first quarter of 2016.
Meanwhile, the figures are $107 billion, $175 billion and $95.6 billion for the three countries, respectively.
Nguyen Duc Thanh, head of the Vietnam Institute for Economic and Policy Research (VEPR), said $12 billion is not a big figure, commenting that Vietnam has more than $30 billion in its forex reserves and the State Bank can diversify the national assets the way it wants, while the US government bond is a kind of asset chosen by many countries.
How much financial assets in the US does Vietnam have? According to Phan Minh Ngoc, a renowned economist, the amount of $12 billion reported by local newspapers lies in the US 2, 3, 5, 7, 10 and 30-year term Treasury bonds and Treasury notes.
Besides long-term bonds, Vietnam may also hold Treasury bills with short 4, 13, 26, 52 week terms, issued at prices below nominal value.
However, the US Treasury does not separate statistics about the treasury bills held by Vietnam, but it takes into account foreign liabilities reported by the US banks and finance companies.
The total value of liabilities reported by the US banks and finance companies to Vietnam had reached $6.8 billion by the end of March 2016.
This means that Vietnam now holds nearly $19 billion worth of financial assets in the US
Another question has been raised about the profits the $19 billion worth of financial assets brings to Vietnam every year.
According to Ngoc, the $12.1 billion worth of US government bonds can bring $110 million at minimum and $318 million at maximum, depending on the types of bonds Vietnam holds.
With the other $6.8 billion worth of financial assets, Vietnam may earn $19-47 million a year, supposing that all assets are US Treasury bills.
Regarding the liquidity of the financial assets, Ngoc said the US government bonds always have high liquidity. Investors can sell bonds through many different channels in many countries, including to the US Treasury.