Government bond market stronger than ever

14:23 | 08/05/2018 Finance - Banking

(VEN) - Nine years since its launch, the government bond market is viewed as an effective channel to raise funds for the state budget.

government bond market stronger than ever
The Vietnamese bond market has been one of the fastest growing in the world’s emerging economies

According to the Hanoi Stock Exchange (HNX), from 2009 to February 2018, by auctioning government bonds on the HNX, the state raised VND1,500 trillion for the budget at interest rates of 0.8-1.5 percent a year. This capital has been allocated to investment programs for socioeconomic development.

Before 2014, government bonds were mobilized at maturity periods from two to five years. However, at present, maturity periods of over five years are quite popular with the funds and insurance companies. Investors are also interested in 15-year, 20-year and 30-year terms. According to the HNX, non-bank investors are participating more in the bond market. About 44.6 percent of market members in the primary bond market are non-bank financial institutions, while the number of banks has fallen to 55.4 percent from 80 percent.

In addition to coupon bonds, the State Treasury coordinated with the HNX to issue two new government bonds in 2015, including long-coupon bonds and zero-coupon bonds. These two products are attractive to insurance companies and pension fund investors. In the first quarter of 2018, new products including stock borrowing and lending (SBL) and sell-buyback (SBB) were introduced to the primary bond market.

The Vietnamese bond market has been one of the fastest growing in the world’s emerging economies. By 2017, the total market value of government bonds amounted to 19 percent of GDP, with an average trading value of VND10.5 trillion per session. In particular, 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).

The Vietnamese bond market has been operating on a modern and advanced technology platform in line with international practices.

In order to support the authorities, issuers and investors in identifying market trends and valuation of bonds, the HNX has successfully put into operation a government bond yield curve system.

Deputy Chairwoman of the HNX Board of Management Nguyen Thi Hoang Lan said the Vietnamese bond market has developed in scale and will continue to introduce new products to investors.

Lan Ngoc