(CPV) - After 15 years of development, the government bond market has become one of the most important capital mobilization channels of the economy, serving the goals of public investment and government debt restructuring. The Ministry of Finance aims to develop the government bond market in terms of scale, liquidity and international integration, meeting the huge capital demand for implementing key projects and socio-economic goals by 2030.
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| Photos at the seminar (Photo: MP) |
From legal foundation to effective practice
At the conference summarizing 15 years of the Government bond market (G-bond) organized by the Ministry of Finance on December 5, delegates highly appreciated the role and achievements that the G-bond market has brought to the economy . Since the launch of the specialized market in 2009, G-bonds have grown strongly in both breadth and depth, becoming the main capital mobilization channel for the Government, policy banks and local authorities.
The legal framework for the government bond market has been completed synchronously, in accordance with international practices. Regulations standardizing the issuance, bidding, pricing, listing and trading processes have created the foundation for a modern, transparent and efficient bond market. In particular, government bond products have been diversified with full maturities (short-term, medium-term and long-term), flexible interest payment methods, meeting the diverse needs of investors.
The technical infrastructure for bond transactions has also been upgraded through each phase. The time from issuance to transaction has been shortened to 2 days, ensuring smooth and safe financial transactions. Since 2017, payment for government bonds has been transferred from commercial banks to the State Bank of Vietnam (SBV), improving safety and conforming to international practices.
One of the outstanding achievements is the ability to effectively mobilize capital to restructure the government debt portfolio. By November 2024, the remaining term of the debt portfolio will reach 9.05 years, while the issuance interest rate has dropped sharply from 6-8% (before 2014) to only 2-4% today. This not only reduces the debt repayment pressure on the budget but also contributes to improving the national credit rating, which is rated at BB+ by organizations such as S&P and Fitch.
According to Ms. Phan Thi Thu Hien, Director of the Finance - Banking Department, Ministry of Finance, the socio-economic development strategy for the 2021-2030 period sets an ambitious goal: Vietnam will become a modern industrialized country with high average income by 2030. To achieve this, the outstanding debt of the bond market needs to reach at least 58% of GDP, in which government bonds continue to play a key role.
Capital demand in the coming period is forecast to increase sharply, especially to implement key projects such as the North-South high-speed railway, with a total investment of VND1.7 million billion. On average, this project needs to mobilize about VND170 trillion per year. In addition, the total capital demand is expected to increase from the current VND500-600 trillion to VND700-800 trillion per year in the coming period, depending on the progress of public investment disbursement.
Faced with this challenge, the Ministry of Finance is orienting the development of the government bond market in a way that ensures adequate capital mobilization while improving the efficiency of capital use. Solutions include regularly issuing government bond products, announcing maximum issuance limits, adjusting appropriate interest rates, and closely linking capital mobilization with the disbursement progress of key projects.
One of the priorities for developing the government bond market is to increase liquidity in the primary and secondary markets. Market liquidity has made great strides thanks to the system of market makers that play a role in promoting transactions, meeting the buying and selling needs of investors. The bond holding ratio of long-term non-bank financial institutions reached 60.5% by the end of the third quarter of 2024, a sharp increase compared to 20% in 2009.
In addition, the Ministry of Finance focuses on diversifying bond issuance terms, from short-term (1-3 years) to long-term (10-30 years), to meet the investment needs of many subjects. Long terms are not only suitable for public investment projects but also help the Government reduce short-term debt repayment pressure, improving the ability to manage the debt portfolio sustainably.
Developing the Government bond market associated with international integration
Mr. Bui Hoang Hai, Vice Chairman of the State Securities Commission (SSC), emphasized the role of the government bond market as an important reference tool for the entire financial system. The benchmark yield curve, built from bond market data, not only helps forecast interest rate trends but also supports businesses and investors in making important financial decisions.
However, to develop a standard yield curve, it is necessary to ensure accurate input data and expand bond maturities. In particular, it is necessary to encourage investors to participate in long maturities (10-30 years), which helps increase stability and reduce volatility in the market.
In the future, the coordination between the Ministry of Finance and the State Bank will continue to be strengthened to synchronously develop the components of the financial market, including the derivatives, currency and foreign exchange markets. Expanding international cooperation, attracting credit rating organizations and foreign investors will be the key to enhancing the position of the Vietnamese government bond market.
According to World Bank (WB) experts, although Vietnam's government bond market has grown remarkably, from 6% of GDP in 2011 to more than 25% of GDP today (equivalent to 100 billion USD), this scale is still small compared to the potential of the economy.
The World Bank recommends that Vietnam improve its bond pricing mechanism, ensure consistent prices in the primary and secondary markets, and use government bonds as a reliable asset pricing tool. Upgrading the trading system and enhancing transparency through cooperation with international credit rating agencies will not only help the government bond market attract more investment capital but also support the upgrading of Vietnam's stock market.
To meet the development requirements in the coming period, the government bond market needs to be comprehensively developed in terms of scale, liquidity and integration level. Solutions to improve capital mobilization efficiency, synchronize with disbursement progress and public investment needs will be a solid foundation for realizing the country's major socio-economic goals, towards sustainable development and prosperity.
With its importance and clear development orientations, the government bond market continues to be a key tool in mobilizing financial resources, contributing to the successful implementation of Vietnam's economic strategies in the future.
Source: https://dangcongsan.vn/kinh-te/thi-truong-trai-phieu-chinh-phu-nen-tang-vung-chac-cho-phat-trien-kinh-te-685433.html
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