Myanmar to commence 10-year bond auctions ‘soon’

Myanmar will start auctioning 10-year sovereign bonds to meet demand for long term debt from the newly minted insurance industry, said Daw Si Si Pyone, Director General of the Treasury Department under the Ministry of Planning and Finance (MoPF).

“We are planning to launch auctions for 10-year government treasury bonds soon as demand, mainly from the insurance companies, is rising,” she said at a conference on Monday, but did not provide a fixed schedule for the auction or further details on coupon rates.

It is common for insurance firms to invest their premiums in long term sovereign debt, which is less risky than funds and equities, to grow profits and in some instances lower subsequent premium amounts to make their policies more attractive.

“We have already prepared funds to invest in government bonds,” said U Thaung Han, managing director of CB Insurance.

The insurance sector’s participation has been keenly anticipated as it will help to deepen Myanmar’s nascent bond market and help raise capital to plug the fiscal deficit. It also aligns with a wider goal to reduce Myanmar’s reliance on the Central Bank to plug its fiscal deficit. Within the next two years, the aim is to wean the country off Central Bank financing completely.

Special Economic Consultant to the State Counsellor Sean Turnell lauded the government’s move to widen its bond financing options, saying this was better than borrowing from foreign countries.

Myanmar first introduced sovereign bonds in 2015, when it commenced auctions for 3-month Treasury bills. In 2016, it launched 6-month and 12-month bills as well as 2-year and 5-year Treasury bonds.

Over the past four years, Myanmar has managed to raise over K600 billion in sovereign debt, Daw Si Si Pyone said.

Meanwhile, the MoPF is also working on a bond market master plan with support from the Asian Development Bank (ADB). The plan will include strategies and procedures to deepen and manage the bond market over the short and longer term.

‘’Myanmar is still at a very early stage in bond market development as the government previously focused more on developing the equity market instead,” said Sophie Nguyen, financial sector economist for the Southeast Asia Department at the ADB. She added though, that the plan to introduce 10-year bonds is a step in the right direction in deepening the bond market in Myanmar.

Source : Myanmar Times

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