Between end-June and end-September, government bond yields in Viet Nam fell at the short-end of the curve but rose at the long-end resulting in a steeper curve. Yields fell the most for the 1-year tenor, dropping 36 basis points (bps), while yields for 2-, 3-, and 5-year tenors also declined. By end-October, there has been a significant rise at the short-end of the curve, specifically, at the 1- and 2-year tenors rising 36.5 and 23.5 bps, respectively, bringing them back to their end-June levels, which reflected the State Bank of Vietnam (SBV) recent move to hike its refinancing rate from 14.0% to 15.0% in October. Meanwhile, SBV has been holding its base interest rate at 9.0% since December 2010 and has also maintained its discount rate and reverse repurchase rate at 13.0% and 14.0%, respectively.

Viet Nam's local currency (LCY) government and corporate bonds outstanding each posted double-digit annual growth rates in September. The bond market as a whole expanded 22.2% y-o-y and 1.8% quarter-on-quarter (q-o-q) to reach VND353 trillion (US$17 billion) at end-September. Total LCY government bonds outstanding stood at VND321 trillion (US$15 billion) at end-September, representing growth of 21.1% y-o-y and 2.1% q-o-q. Total LCY corporate bonds outstanding expanded 34.7% y-o-y to VND32 trillion (US$2 billion) in 3Q11 but fell slightly by 1.6% on a quarterly basis.

The SBV issued a circular enumerating the conditions required for credit institutions and branches of foreign banks to purchase corporate bonds. On 29 August, the SBV hiked the FCY reserve requirement ratios by 100 bps for state-owned commercial banks, joint stock commercial banks, joint venture banks, foreign bank branches, and wholly owned foreign banks. On 28 September, the SBV issued a circular to fix the maximum mobilizing interest rates at 6.0% per annum for demand and time deposits less than 1 month, and at 14.0% per annum for time deposits over 1 month. The SBV raised its refinancing rate, one of its three policy rates, by 100 basis points to 15.0% effective on 10 October 2011. The move was the fifth increase in the refinancing rate for the year.