Market Summary

Yield Movements

Between 1 June and 15 August, local currency (LCY) government bond yields in Viet Nam climbed for all tenors, shifting the entire curve upward. The overall rise in yields was reflective of strong economic growth posted in the first half of the year. In addition, the State Bank of Vietnam has engaged in open market operations to rein in inflation and stabilize the value of the Vietnamese dong.

Size and Composition

Viet Nam’s LCY bond market was the sole market in emerging East Asia that posted a quarter-on-quarter (q-o-q)  contraction in bonds outstanding in the second quarter of 2018. At the end of June, the LCY bond market’s size  stood at VND1,173.2 trillion, which was down 1.4% q-o-q and reversed a 10.8% q-o-q hike in the first quarter of 2018. At the end of June, the outstanding amount of LCY government bonds slipped to VND1,096.0 trillion while the outstanding amount of corporate bonds climbed to VND77.3 trillion.  

Policy, Institutional and Regulatory Developments

In June, the State Bank of Vietnam issued a regulation that restricts the purchase of corporate bonds by banking institutions, including foreign banks. Under the regulation, credit institutions and foreign bank branches are required to conduct an internal credit scoring and rating of corporate bonds that they plan to purchase. Also, internal management regulations are required to be made for evaluating bond investments, particularly for corporate bonds issued to finance projects in potentially risky areas. Credit institutions and foreign bank branches are also prohibited from purchasing corporate bonds that are issued to fund corporate debt restructuring. This law came into effect in August.