Demand for bonds remained high thanks to abundant liquidity Rising investment demand supported by abundant liquidity after the Tet holiday, in conjunction with around VND18tn (USD780mn) of bonds that came due during the month, led to high winning rates in February’s auctions held by the HNX. VND18.8tn (USD819mn) of G-bonds were successfully issued out of VND22.0tn (USD956mn) of bonds offered, equivalent to a winning rate of 86%.
G-bond issuance surged on high reinvestment demand. Around VND30tn (USD1.3bn) of G-bonds and G-backed bonds came due in January, helping G-bond issuance to jump 28% MoM to VND36.3tn (USD1.58bn). The winning ratio also advanced to 88% from 71% recorded in December.
Issued G-bonds tripled MoM, the VST roughly fulfilled 2018 issuance target. December G-bond issuance nearly tripled to VND28.5tn (USD1.24bn) with a winning rate of 71%, improving from 52% in November as both bond supply and demand surged. As of the end of December, the Vietnam State Treasury (VST) had completed 94.7% of FY2018’s target, which was revised down to VND175tn (USD7.6bn) in September from VND200tn (USD8.7bn).
We estimate around VND24tn (USD1.04bn) of G-bonds and G-backed bonds came due in November, which led to higher demand for bonds during the month. The Vietnam State Treasury (VST) successfully issued VND10.2tn (USD443mn) of G-bonds in November, nearly double the amount raised last month. Winning rate also reached 52.1%, up significantly from 24.6% recorded in October. Rising demand for bonds caused yield of five- and less-than-five-year bonds to decline 15 bps-25 bps on secondary market.
The Vietnam State Treasury (VST) raised only VND5.4tn (USD233mn) of G-bonds out of VND21.8tn (USD948mn) offered, a drop of 34% MoM while the wining rate plunged to 20.6% from 63.3% in September. As of October 31, 10Y and 15 primary yields rose to 5.0% (+20 bps MoM) and 5.1% (+10 bps MoM), while the 5Y yield was quoted at 4.2%, up 70 bps since the latest auction in August.
The Vietnam State Treasury (VST) raised VND15.7tn (USD683mn) of G-bonds in September, down slightly by 2.2% MoM, but the winning rate advanced to 63.3% from 49.9% in August. 10Y and 15Y yields jumped 30 bps to quote at 4.8% and 5.1%, respectively, which helped these two terms to record high winning rates of 81.7% and 69.2%.
Yields increased further on tightening liquidity. On the primary market, G-bond issuance remained stable at VND16.1tn (USD700mn), up 4.2% from July. Winning rates have not picked yet, reaching only 49.8% for overall G-bonds and 13% for G-backed bonds due to tightening liquidity in the system. Yields on the primary market continued to inch up from 2 bps to 5 bps, with the 5Y reaching 3.5%.
Yields jumped across all tenors due to tightening liquidity. Yields of shorter terms saw sharper increases with 1Y, 2Y, 3Y bond yields approaching levels seen early this year of 3.5% (+116 bps MoM), 3.61% (+93 bps MoM) and 4.06% (+41 bps MoM), respectively. Total trading turnover in the secondary market dropped 11.2% MoM to VND155tn (USD7.8bn) as bond prices continued to fall steeply. Net foreign outflows of VND2.64tn (USD115mn) in July were the sharpest in more than one and a half years.
VST failed to achieve Q2 issuance plan. G-bond issuance surged 51.5% MoM to reach a five-month high of VND16.9bn (USD755mn) in June. The winning rate also increased to 54.3% from only 36.6% last month, with primary market yields picking up by 5 bps to 10 bps across all tenors. The Vietnam State Treasury (VST) failed to achieve its Q2 issuance plan as it issued only VND34.2tn (USD1.5bn) of G-bonds, completing only 52.6% of its plan.
Bond yields continued rising across almost tenors. The 5Y bond yield cooled at the beginning of the month but began to rise again from mid-month to a five-month high of 3.73%, up 12 bps MoM. Bond yields rose across almost tenors, due to 1) profit-taking, 2) declining system liquidity and 3) moderately rising inflation. Net foreign inflows of VND1.45tn (USD63.7mn) were 1.5 times higher than total net foreign inflows in the previous four months.