Bond market develops stably, effectively mobilizing capital for the State budget

Illustration image. Source: Internet

Multi-price bidding makes bidding more competitive

According to information from HNX, as of December 15, 2021, HNX held 213 auctions of government bonds and guaranteed government bonds to raise capital for development investment with a total calling value of VND449,124 billion, successfully mobilized VND332,467 billion, up 2.9% over the same period in 2020, the successful deposit rate reached 74.02%.

Accordingly, in terms of government bonds, the State Treasury has mobilized VND313,243 billion, up 4.47% over the same period in 2020, reaching 83.97% of the plan for 2021 (VND373,000 billion); Bank for Social Policies mobilized VND11,024 billion, reaching 100% of the 2021 plan; Vietnam Development Bank mobilized VND2,000 billion.

Notably, the issuance interest rate decreased on all terms compared to the end of 2020. Accordingly, the deposit interest rate for terms from 5 to 30 years decreased from 0.12%/year to 0.46%/year. On average, the average issuance interest rate in 2021 will decrease by 0.58%/year compared to 2020.

Compared with previous years, the average issuing interest rate of government bonds has decreased from 10.7%/year in 2010 to 6.5%/year in 2015 and to 2.27%/year in 2021, helping save costs of raising capital for the Government.

In order to increase the efficiency of treasury management activities, HNX has coordinated with the State Treasury to deploy operations of early redemption of the bonds which come from temporarily idle state funds, and to pilot the multi-bidding method in government bond auctions.

The repo transactions of government bonds are performed by the State Treasury in accordance with the provisions of Circular No. 107/2020/TT-BTC dated December 21, 2020 of the Ministry of Finance providing guidance on repo transactions of government bonds from the temporarily idle state budget of Vietnam State Treasury. This has opened a mechanism to allow the State Treasury to carry out repo transactions of government bonds with commercial banks that are members of government bonds transactions.

Meanwhile, the multi-price bidding method, applying multiple winning interest rates, depending on the respective bidding interest rates of each investor, helps to create more competition in bidding. At the same time, helping investors have the opportunity to experience new bidding methods following international practices.

Currently, the single-price and multi-price bidding methods are being applied in parallel. In the future, the multi-price method will be applied to government bonds with a term of 5 years, calling for bids on a weekly basis. Since the deployment, through the electronic bidding system of HNX, the State Treasury has organized nine auction sessions following the multi-price method, successfully mobilizing VND920 billion.

According to HNX, based on the evaluation of the results of pilot implementation of multi-price bidding for 5-year government bonds, HNX and the State Treasury would study and report to the Ministry of Finance for consideration and decision on further implementation or expansion for other types of terms in the near future if appropriate.

On the secondary market, as of December 15, 2021, the scale of listing government bonds and government-guaranteed bonds on the HNX reached VND1,498,650 billion, up 11.91% over the same period in 2020.

The average trading value of a session reached VND11,232 billion/session, up 11.46% over the same period in 2020. Repo transaction value accounted for 32.67%. In particular, the proportion of transaction value of foreign investors accounted for 2.82% of the total transaction value of the whole market, down 1.38% compared to the same period in 2020. Net buying value in 2021 of investors foreign investment reached VND9,721 billion.

Thus, the average trading value in 2021 has reached a record level in the past 10 years with an increase of 9.36% compared to 2020 and an increase of 29.9 times compared to 2010.

“The stable and sustainable development of the Government bond market at Hanoi Stock Exchange (HNX) is thanks to the active contribution from bond issuers, typically the State Treasury in improving bidding activities, variety in auction method, making bond auctions become an effective and economical capital mobilization channel for the state budget," HNX said.

In addition, the restructuring of products issued on the primary market of the State Treasury, focusing on issuing long term bonds (over 10 years) would help the trading term on the secondary market continue the trend of shifting from focusing on medium-term transactions (under 3 years) to intermediate term and long term, helping to stabilize the Government's long-term investment capital. The liquidity in the secondary market also actively supports the issuance of the primary market.

756 successful corporate bond issuances

For private placement corporate bonds, information from the HNX showed that, in 2021, the Department revised its regulations and issued operating procedures for the corporate bond web portal.

As of November 30, 2021, HNX received 878 sets of information disclosure documents before issuance in the domestic market, five sets of information disclosure documents before issuance in the international market.

Through synthesizing information from bond issuance organizations published on the website, in the domestic market, as of November 20, 2021, there were 288 enterprises with 756 successful issuances of bonds by private placement method with a value of more than VND458,153 billion, up 35.38% compared to 2020.

In the foreign market, there were four successful issuances of corporate bonds with issuance value reaching US$1,425 million, an increase of 7.7 times compared to 2020.

According to HNX, in order to proceed to manage individual bond transactions on the organized trading market, on the basis of the private placement bond trading plan approved by the Ministry of Finance dated August 17, 2021, Official Letter No. 68/CV-VNX on implementing the building of a private bond issuance system and Official Letter No. 1218/TCNH-TT dated September 20, 2021 on preparing conditions for the implementation of the corporate bond market, HNX has been implementing and building corporate bond trading system and corporate bond supervision criteria system.

Initially, the Department has agreed to consult with relevant professional units and is currently developing the system, and has completed the corporate bond supervision criteria system, reported it to the Vietnam Stock Exchange and State Securities Committee.