Market Summary

Yield Movements

The yield curve for Viet Nam’s local currency (LCY) government bonds shifted upward as yields in all maturities increased between 28 February and 15 May. Yields rose 98 basis points (bps) on average across the curve. Notably large yield jumps were seen on bonds with 5-year to 10-year tenors, averaging 115 bps. Yield increases on all remaining tenors averaged 85 bps. The upward yield movements were largely due to the combined effects of increasing domestic inflationary pressures, the hawkish stance of the United States (US) Federal Reserve in unwinding its accommodative monetary policy position, and the reduced optimism about global economic growth. The persistence of the State Bank of Vietnam’s accommodative monetary policy may have capped upward pressure on bond yields.

Size and Composition

Viet Nam’s LCY bond market grew 2.4% quarter-on-quarter (q-o-q) to VND2,138.6 trillion (USD93.6 billion) at the end of the first quarter of 2022. The government bond market expanded 1.5% q-o-q in the first quarter of 2022 to VND1,511.5 trillion, driven by the expansion in Treasury bonds and central bank bills outstanding. Debt outstanding in the corporate sector amounted to VND627.1 trillion at the end of March, on growth of 4.6% q-o-q. On an annual basis, the bond market grew 28.9% year-on-year during the quarter. Vietnam’s LCY bond market largely comprises government bonds, which accounted for a 70.7% share of the total at the end of March, while corporate bonds’ market accounted for 29.3%.

Policy, Institutional and Regulatory Developments

In April, Prime Minister Pham Minh Chinh issued Directive No. 304, which includes instructions for the Ministry of Finance to revise regulations on the corporate bond market in order to enhance efficiency in enforcing greater transparency and ensuring safety in the market. The directive stated that the focus should be placed on companies with a large amount of bond issuance, high-interest rates, and those having unfavorable business performance without sufficient guarantees. This follows the growing number of cases in Viet Nam of unlawful practices related to corporate bond issuance.