Ten years of development of the Government bond market

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More than VND 180 trillion was mobilised per year on average

In 10 years of operation, the government bond market has grown impressively in size and depth, confirming its important role as an effective capital mobilisation channel for the State budget, making a significant contribution to the country’s economic development.

In the primary market, in the 10 years, more than VND 1.8 million billion was mobilised for the State budget to serve the needs of the country’s investment and economic development country, equivalent to an average annual mobilisation of more than VND 180 trillion, accounting for 10.6 percent of the total social investment in 2018, 31 percent of the total investment of the state sector in 2018. To achieve this result, 1,872 auctions were held with the average successful ratio of 60-70 percent of the total bid volume.

Over the past 10 years, mobilising interest in the Government bond market decreased significantly, saving the State budget thousands of billions of dong in interest payments and supporting in regulating the macro economy of the State. The average mobilising interest rate has decreased from four to six percent per year on all terms. In particular, sharply decreasing in five year terms (down from 10.49 percent / year in 2009 to 3.55 percent / year in 2019; 10-year term (down from 9.7 percent / year in 2009 to 4.35 percent / year in 2019).

In contrast, the maturity of bonds increased. Up to now, the State Treasury has successfully issued Government bonds with terms of up to 30 years. The diversity of terms give investors more options in this market and reduce pressure of debt payment in the short term and increase the efficiency of development and investment of society

If in 2009, government bonds were issued with only four terms of two, three, five and ten years, in which over five-year term accounted for only 15 percent of the total issued bonds, in 2019, there are 15-year, 20-year and 30-year terms, in which over 10-year terms accounted for up to 90 percent of total issued bonds.

In the secondary market, government bond transactions have been constantly increasing in size and depth, approaching the countries with developed Government bond markets in the region and in the world. Bond liquidity in 2019 reached more than VND 9 trillion / session, nearly 24 times higher than 2009. Repos trading value also grew strongly from a modest scale with a proportion of 6.5 percent of total trading value in 2009 to 55 percent in 2019.

Technology infrastructure upgraded constantly

With the improving market legislative framework, during the past 10 years, the government bond products have been added on both primary and secondary markets. Basically, these products meet the diverse investment needs of the market.

In the primary market, there are not only basic products which are bonds with periodic interest payment, but also products with interest-free and long-term interest payment. In the secondary market, in addition to the two basic products, outright and repos, at the end of 2018, repos added three products

In parallel with the market development, technological infrastructure to serve the market such as the bidding system, the trading system has been invested and upgraded by HNX, meeting the demand and support for diverse activities of the market on a modern technology platform.

The electronic automated bidding system (EABS), the remote trading system and the electronic bond trading system (E-BTS) based on the internet have met demand for information assessing and more modern transactions of the market members and investors, helping them make more effective investment decisions, saving significant costs and time.

In addition, the system of government bond market indicators has also developed. Starting with the yield curve launched in March 2013 and January 2015, bond indices with various maturities continued to be used. Up to now, these two indicator systems have played an active role in setting reference interest rates and bond pricing, making it easier for investors and the market members in bond trading. Both international news agencies Bloomberg and Reuters provided information on this indicator system under "VN Bond Yield Curve" and "VN Bond Index" to international investors.

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Ten years is not a long time, but what the bond market has achieved is very impressive in the eyes of Vietnamese and international investors. In 2013, 2014, 2018, 2019, Vietnam Government Bond Market was assessed by Asia Development Bank (ADB) as one of the markets with the strongest growth rate in East Asia. With the results, we could expect that the government bond market will reap more achievements, develop more and match its potential and affirm the indispensable position and role of financial institutions in the economy.