Bond market remained stable in April. Although total G-bonds issued in the primary market in April fell 12% to VND12.6tn (USD548mn), the winning rate improved to 68% from 52% last month. Of the total issuance, investors continued to favor 10Y and 15Y bonds (VND4.9tn or USD213mn, and VND6.4tn or USD278mn), respectively, equivalent to 39.3% and 50.9% of bonds successfully sold, with respective high winning rates of 73% and 85%.
Tighter liquidity in the banking system reduced bond demand. Total G-bonds issued in March reached VND14.3tn (USD621mn), down 24.3% MoM. The winning rate dropped to 52% from 86% in February. A more balanced liquidity setting in the banking system reduced bond demand, though we estimate approximately VND29.7tn (+64% MoM, USD1.3bn) of bonds came due.
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.