Market Summary

Yield Movements

The yields of local currency (LCY) government bonds in Viet Nam declined for all tenors between 15 June and 15 August, shifting the yield curve downward. Yields fell 11 basis points (bps) on average across the curve, with the smallest drop seen for the 2-year tenor (3 bps), while the largest drop was for the 15-year tenor (18 bps). The downward movement of the yield curve reflected risk aversion amid renewed uncertainties posed by the more contagious variants of COVID-19, and abundant liquidity in the market, resulting in the continued preference for safe-haven assets like government securities. The State Bank of Vietnam’s accommodative monetary policy and inflation remaining low also offset any upward pressure on the bond yields.

Size and Composition

Viet Nam’s total LCY bonds outstanding expanded 6.1% quarter-on-quarter (q-o-q) to VND1,759.0 trillion (USD76.5 billion) at the end of the second quarter of 2021. The quarterly growth was mainly driven by the corporate sector as outstanding government debt slightly decreased. The government bond market contracted 0.5% q-o-q as the marginal increase in Treasury bonds was offset by the decline in government-guaranteed and municipal bonds outstanding and the absence of central bank bills. Corporate bonds outstanding increased 36.6% q-o-q as issuances from the corporate sector surged during the quarter. On an annual basis, the bond market expanded 27.5% year-on-year in Q2 2021. Government bonds accounted for 77.2% of Viet Nam’s bond market at the end of June, while corporate bonds comprised 22.8%.

Policy, Institutional, and Regulatory Developments

On 28 June, the Hanoi Stock Exchange launched the 10-year government bond futures, which will be traded on the exchange’s derivatives market. The base asset of the derivatives product is a 10-year government bond issued by the State Treasury of Viet Nam amounting to VND100,000 and with an annual interest rate of 5.0%. According to the Hanoi Stock Exchange, the new bond futures product aims to diversify derivatives securities in the market and provide more risk prevention tools for long-term government bonds. The 10-year government bond futures is the third derivatives product in the Vietnamese bond market, following the VN30 Index and 5-year government bond futures.