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Thursday, July 25, 2024

Vietnam’s Q1 bond market rebounds – ADB

The Saigon Times

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HCMC – Vietnam’s bond market grew by 7.7% quarter-on-quarter (q-o-q) in the first quarter of 2024, driven by increased government bond issues and the State Bank of Vietnam’s resumption of bill issues, according to a report by the Asian Development Bank (ADB) on Wednesday.

The growth in G-bonds, which constitute the bulk of Vietnam’s debt at over VND2 quadrillion, rose by 3.3% quarter-on-quarter due to the Government’s increased funding needs. In contrast, the corporate bond segment, accounting for 24.8% of the bond market, contracted by 0.9% due to high maturities and a lower volume of new issues.

Bond yields increased across all tenors between March and May 2024, with an average rise of 56 basis points. This was attributed to the U.S. Federal Reserve’s delay in interest rate cuts and rising domestic inflation. Vietnam’s year-on-year (y-o-y) inflation rate edged up to 4.44% in May from 4.40% in April, driven by higher energy and pork prices.

The total bond issues fell by 36.7% q-o-q in Q1 2024. Corporate bond issues plunged by 81.3% following the reinstatement of Decree No. 65, which imposed stricter requirements.

Central bank bill issues also contracted by 45.2%, as the State Bank of Vietnam resumed issuance only in March. However, Treasury and other Government bond issues more than doubled to VND90.5 trillion.

Insurance firms and banks held 99.5% of Government securities at the end of March, with insurance companies increasing their share to 60.8% from 57.8% a year earlier. Banks’ holdings decreased to 38.7% from 41.7% in the same period. Offshore investors, securities companies, and investment funds held a combined 0.5% of the market.

Vietnam’s sustainable bond market, comprising green bonds and other sustainable instruments, contracted by 0.5% q-o-q to US$800 million at the end of Q1 due to no new issuances. Foreign-currency-denominated instruments made up over 70% of the total sustainable bonds.

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