The government issued bonds on Wednesday, receiving an order for 15 billion MNT, as part of their plan to raise 346 billion MNT in the second quarter of 2017.

Approximately 26 billion MNT will be raised from bonds in May. Analysts note that the sale of bonds has increased as the government has decided to complete transactions through the Mongolian Stock Exchange (MSE).

In the first two months of 2017, Mongolian citizens were responsible for 30 percent of the capital raised from bonds, while foreign investors accounted for only 2.5 percent of the capital. Based on increased demand, the government has begun to decrease the interest rates of bonds. Officials have noted that demand for the most recent bond issued is double the supply.

On May 9, the government issued a 52-week bond with a 14.67 percent interest rate and a 104-week bond with a 15.99 percent interest on the primary market. Compared to bonds issued on April 11, the interest rate has decreased by two percent from its initial 18 percent interest rate.

The decrease in the interest rate has been sudden, as bonds issued on April 25 had an interest rate of 16 percent, while the most recent bond has an interest rate of 14.6 percent.

Currently, the annual savings interest rate at commercial banks is 15 percent. Economists note that while interest payments for savings and government bonds are essentially the same, taxes are not imposed on bonds and that buyers are only required to pay a brokerage fee.

A new savings interest tax came into effect on May 1, a tax of 10 percent on all savings interest. Officials forecast that the tax will generate 180 billion MNT in state revenue over the next three years.

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