According to the Asian Development Bank (ADB), Vietnam's sustainable bond market is expected to reach a size of about 800 million USD by the first quarter of 2024.
Vietnam's corporate bond market to fall 0.9% in first months of 2024 - Photo: QUANG DINH
According to the latest edition of the Asian Development Bank (ADB)'s Asia Bond Monitor , Vietnam's local currency bond market in the first quarter of 2024 recovered with a growth rate of 7.7% compared to the previous quarter.
The reason is that the issuance of government bonds increased and the State Bank of Vietnam resumed the issuance of central bank bills in March. Treasury bonds and other government bonds increased by 3.3% compared to the previous quarter to support the government's funding requirements. Meanwhile, corporate bonds decreased by 0.9% due to a large volume of maturing bonds and low issuance. According to ADB experts' estimates, the sustainable bond market in Vietnam reached a size of 800 million USD at the end of March. This market includes green bonds and sustainable bond instruments issued by individual enterprises, short-term. Although the size is still small, green bonds are recording increasing interest in sustainable finance instruments and green initiatives in enterprises. Sustainable bonds are mainly issued by enterprises and have short maturities, showing a new trend in financing sustainable and environmentally friendly projects. Regarding government bond yields, ADB said interest rates increased by an average of 56 basis points across all maturities due to rising domestic inflation and the US Federal Reserve delaying policy rate cuts. Vietnam’s year-on-year consumer price inflation rose to 4.44% in May, approaching the government’s ceiling of 4.50%.
Higher interest rates over long periods of time
Higher interest rates for longer also cast a shadow over sustainable bond markets in the ASEAN, China, Japan and Korea (ASEAN+3) region, leading to a decline in sustainable bond issuance in Q1-2024, reaching $805.9 billion at the end of March. Bond outflows from regional markets totaled $20 billion in March and April. Slower-than-expected deflation reinforced the case for higher interest rates for longer, boosting both short- and long-term bond yields in advanced economies. Regional currencies depreciated against the USD and credit default swap spreads widened in most markets. Most regional equity markets rallied on the upbeat economic outlook, but ASEAN equity markets saw outflows of $4.7 billion. "Financial conditions in emerging East Asia remain stable. But persistent geopolitical tensions and adverse weather events pose higher risks to inflation, adding to uncertainty about the path of disinflation. Some regional monetary authorities may maintain higher interest rates for longer to defend their currencies amid uncertainty about the global reflationary trend and monetary stance," said ADB Chief Economist Albert Park. The local currency bond market in emerging East Asia, which includes the ASEAN economies, China, Hong Kong and South Korea, grew at a slower pace in the first quarter of 2024, expanding by 1.4% to $24.7 trillion. A slowdown in government bond issuance in China and Hong Kong (China) has constrained the expansion of the regional market. However, the corporate bond segment has grown thanks to strong issuance as governments push for stimulus measures. However, it is still the second largest sustainable bond market in the world, accounting for 18.9% of the global market share, behind the European Union at 37.6%. Notably, sustainable bonds account for only 2.1% of the total ASEAN+3 bond market, compared to 7.3% in the European Union. source: https://tuoitre.vn/trai-phieu-ben-vung-o-viet-nam-dat-quy-mo-800-trieu-usd-20240626115324416.htm
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