Market Summary

Yield Movements

Local currency (LCY) government bond yields in Viet Nam declined for all tenors between 31 August and 15 October, resulting in a downward shift of the yield curve. The decline in interbank rates drove yields lower during the review period. The State Bank of Vietnam is expected to keep interest rates steady for the rest of the year to support economic growth, and opts to use other monetary tools to curb inflation. The central bank has been engaging in open market operations to manage liquidity and intervening in the foreign exchange market to stabilize the VND–USD exchange rate.

Size and Composition

The size of Viet Nam’s LCY bond market climbed to VND1,232.4 trillion at the end of September, up 5.0% quarter-on-quarter (q-o-q) and 15.7% year-on-year (y-o-y). Viet Nam’s growth rates were the third-fastest in emerging East Asia on a q-o-q basis and the fastest on a y-o-y basis, albeit coming from a low base. At the end of September, the aggregate size of the LCY government bond market reached VND1,152.8 trillion on growth of 5.2% q-o-q and 14.7% y-o-y. The outstanding amount of LCY corporate bonds rose to VND79.5 trillion at the end of September, posting a 2.9% q-o-q and 31.6% y-o-y expansions in Q3 2018.

Policy, Institutional and Regulatory Developments

In October, the State Treasury lowered its bond issuance plan for 2018 to VND175 trillion from VND200 trillion as originally planned. The breakdown of issuance volume for each maturity is as follows: (i) 5-year bonds at VND31 trillion, (ii) 7-year bonds at VND11 trillion, (iii) 10-year bonds at VND64 trillion, (iv) 15-year bonds at VND51 trillion, (v) 20-year bonds at VND9 trillion, and (vi) 30-year bonds at VND9 trillion.