Short term Government securities benefit buyers, but…Economy
Ulaanbaatar /MONTSAME/ The Government bonds with less than one year term are in high demand on the market. A total of MNT834 billion of government bonds were traded on primary market, 98.3 per cent of which had terms for 12-52 weeks or less than one year.
The interest rate of the Government securities, being higher than savings' interest rate, attracts investment, as it allows earning high profit within a short term. During trading of this week, the Finance Ministry offered 39-week bond with 18.8 per cent interest rate and traded MNT15 billion bonds. Though it is beneficial to buyers, interest rate of Government retail securities to domestic market has grown significantly. The interest rate is higher than the 10.8 per cent interest rate of the bond issued to international market last time in April 2016 and even three fold the Chinggis bond’s interest rate. Since the start of 2017, Government securities of MNT33.8 billion have been sold in four trades.
In 2016, the Government raised MNT280.4 billion bonds from domestic market. A total MNT834.1 billion of government securities have been sold at the Mongolian Exchange Stock since the first release in November 2014. The largest securities of MNT510 billion in value were released in 2015 in the primary market.
Economists predict, an additional debt of MNT2.4 trillion will be created in 2017, out of which MNT1.7 trillion would be domestic debts. During the parliamentary discussion of the state budget of 2017, some economists warned that 70 per cent of all expected new loans would be spent for basic repayment of the Government loans, particularly 50 per cent of it would be allocated for basic repayment of securities released on international market.
In a time, when foreign investors’ trust has weakened and national economy faces difficulties, the most possible buyers of the Government securities would be commercial banks. 98.2 per cent of the bonds issued in 2016 were bought by domestic investors and 1.8 per cent by foreign investors while in 2015, foreign investors’ purchase occupied one per cent.