Market Summary

Yield Movements

The yield curve of local currency government bonds in Viet Nam shifted upward, with rates increasing across the board between 31 August and 15 October. Yields increased 8 basis points (bps) on average for all tenors. The largest increase was seen for the 1-year tenor at 15 bps, while the smallest gain was for the 5-year and 7-year tenors at 5 bps each. The upward adjustment of the yield curve is in line with the regional trend of increasing bond yields in response to the shift in the monetary stance of the United States Federal Reserve of cutting back its asset purchases later in the year and the possibility of earlier rate hikes thereafter. Viet Nam’s economic downturn in the third quarter of 2021 also affected the rise in yields as it renewed uncertainty over recovery prospects. Nonetheless, the increases were not as high as in other regional markets as the central bank maintained its accommodative stance, inflation rate remained low, and liquidity was still abundant.

Size and Composition

Viet Nam’s local currency bond market expanded 8.1% quarter-on-quarter (q-o-q) to VND1,902.1 trillion (USD83.6 billion) at the end of the third quarter of 2021. The quarterly growth emanated from both the government and corporate segments as both posted quarterly increases. The government bond market increased 4.2% q-o-q to VND1,414.5 trillion, with increases across all government bond segments except for central bank bills, which remained at zero. The corporate bond market maintained its strong expansion at 21.5% q-o-q, reaching VND487.6 trillion, which was underpinned by vibrant issuance activity in the corporate sector during the quarter. On an annual basis, the bond market expanded 23.5% year-on-year. At the end of September, government bonds accounted for 74.4% of Viet Nam’s bond market, while corporate bonds comprised 25.6%.

Policy, Institutional, and Regulatory Developments

On 6 October, the State Treasury implemented a pilot auction using a multiple price method for 5-year Treasury bonds. In a multiple price auction, the successful bidders pay the price stated in their respective bids for the allotted quantity of securities. The expected offering volume for the 5-year Treasury bond auctions was VND1,000-VND2,000 billion per session. For the rest of the tenors, the auction followed the uniform price method.