Market Summary

Yield Movements

The yields of local currency government securities in Viet Nam fell across the curve between 15 June and 15 August. Larger yield declines were observed in short- and medium-dated tenors compared to those at the longer end of the curve. Strong demand from investors for government securities amid abundant liquidity was the main driver of the fall in bond yields. The low-interest-rate environment and weak consumer price inflation also contributed to the downward pressure on yields.

Size and Composition

Viet Nam's total bonds outstanding declined 1.7% quarter-on-quarter (q-o-q) to VND1,349.3 trillion (USD58.2 billion) at the end of the second quarter of 2020, reversing the previous quarter's expansion. The contraction in market size was due to lower outstanding debt in the government sector, which declined 7.8% q-o-q, even as the corporate bond stock increased by 65.6% q-o-q. Government bonds accounted for a larger share of Viet Nam's bond market at 86.2% versus corporate bonds with a 13.8% share.

Policy, Institutional and Regulatory Developments

In July, the Government of Viet Nam issued Government Decree No. 81 to raise standards in the corporate bond market and ensure information transparency. In particular, the decree will limit private issuance to minimize risks for individual investors and will impose more responsibility on underwriters when evaluating the financial capacity of issuers. The decree also states that the total bond issuance of a company cannot exceed its equity capital by five times and that the gap between two bond issuances must be at least 6 months. The issuer must also declare the purpose of the funds and provide a business plan for proper monitoring by investors. The new decree takes effect on 1 September.