Vietnam Sustains Growth Momentum in Bond Market

11:05:28 AM | 30/3/2021

An improving global economic outlook and progress in COVID-19 vaccinations have pushed up bond yields in emerging East Asia, including Vietnam, according to the latest issue of the Asian Development Bank’s (ADB) Asia Bond Monitor.

Local currency bond markets in the region expanded to US$20.1 trillion by the end of 2020. Investor sentiment and financial conditions also improved. Particularly, Vietnam’s local currency bond market grew 8.1% quarter-on-quarter (q-o-q) to reach US$71.0 billion at the end of December 2020. The steady growth in government bonds and corporate bonds supported this growth.

Government bonds outstanding rose 7.1% q-o-q to US$58.8 billion in the fourth quarter of 2020, accounting for 82.8% of the total bonds in the country. Corporate bonds outstanding increased at a much faster rate of 13.6% q-o-q and 169.5% year-on-year (y-o-y) to US$12.2 billion.

Vietnam's government bonds increased by 7.1% q-o-q to reach US$58.8 billion by the end of December 2020, accounting for 82.8% of the country's total bond volume. Corporate bonds also maintained growth momentum, with an increase of 13.6% q-o-q and 169.5% y-o-y, reaching US$12.2 billion.

Previously, Vietnam's local currency bond market posted strong quarterly growth of 11.6% by the end of September 2020 - the highest quarterly growth in emerging East Asia, reaching US$65.3 billion. This growth was supported by expansion in both government bonds and corporate bonds.

Emerging East Asia comprises the People’s Republic of China; Hong Kong, China; Indonesia; South Korea; Malaysia; the Philippines; Singapore; Thailand; and Vietnam.

“Bond markets in emerging East Asia continued to grow, mobilizing funding for the region’s sustainable recovery from the pandemic,” said ADB Chief Economist Yasuyuki Sawada. “Successful vaccination campaigns, accommodative monetary policy stances, and easing of restrictions are spurring economic activity and shifting the recovery into a higher gear.”

Government bond yields in most advanced economies and emerging East Asian markets increased between 31 December 2020 and 15 February 2021. Meanwhile, improved sentiment boosted most equity markets and regional currencies. Capital flows into the region’s equity and bond markets also recovered in the last quarter of 2020.

Emerging East Asia’s local currency bond market reached US$20.1 trillion at the end of December 2020, 3.1% higher than the preceding quarter and 18.1% higher than a year earlier. The size of the bond market grew to the equivalent of 97.7% of the region’s gross domestic product at the end of the fourth quarter of 2020. Local currency bond issuance stood at US$2 trillion.

Government bonds dominated the region’s bond stock at US$12.4 trillion as of the end of December, while corporate bonds amounted to US$7.7 trillion. China remained the region’s largest bond market, accounting for 77.4% of emerging East Asia’s total bond stock.

By Quynh Anh, Vietnam Business Forum