Government bond market develops

10:25 | 10/07/2017 Finance - Banking

(VEN) - According to the Hanoi Stock Exchange (HNX), trading of government bonds in the first five months of this year has developed.

In the first five months, the total value of repo trading (bond trading in which the seller or transferor commits to repurchase the bond after a certain time at a pre-determined price) was at the same level as that of outright trading (bond trading without a repurchase agreement).

In countries with strong bond markets, repo trading typically accounts for 60-80 percent of the total trading value, while outright trading takes the remainder. For example, in the US bond market, repo trading accounts for 80-90 percent of the total trading value. The liquidity of repo trading is considered a measure of the development of the bond market.

After nearly eight years of operation, the Vietnamese government bond market has developed in terms of liquidity, product diversification, infrastructure modernization and the trading system, according to the HNX exchange. In particular, the value of repo trading has been nearly equivalent to that of outright trading since 2016, meaning that the Vietnamese government bond market has seen development.

The Vietnamese government bond market continues to develop in 2017. In the first five months of this year, the value of repo trading accounted for 48.23 percent of the total trading value in the Vietnamese government bond market.

Specifically, as of May 25, 2017, the total trading value of the Vietnamese government bond market reached more than VND706.5 trillion, including nearly VND365.7 trillion in outright trading and over VND340.8 trillion in repo trading. In particular, from March to May this year, the total value of outright trading reached more than VND214 trillion, while that of repo trading stood at nearly VND247.64 trillion.

The average trading value in the Vietnamese government bond market in the first five months of this year reached more than VND7.5 trillion per session, an increase of 18.3 percent compared to a year ago, or a 20.5-fold increase compared to the same period in 2009.

The total value of the Vietnamese government bond market is quite small compared to the country’s gross domestic product (GDP). In 2016, the total scale of the bond market was only 36.9 percent of the total GDP, although Vietnam recorded the highest growth rate among emerging economies in East Asia.

Lan Ngoc