Interest rates of G-bonds plunge in 10 years

The G-bond market has made impressive progress in terms of scale, becoming an effective capital raising channel for the State Budget, contributing significantly to the economic development of the country. - Photo tamnhin.net.vn

September 24 this year was an important milestone for the G-bond market, marking 10 years since its inception. The G-bond market has made impressive progress in terms of scale, becoming an effective capital raising channel for the State Budget and contributing significantly to the economic development of the country.

In the primary market, over 10 years, more than VND1.8 quadrillion (US$77 billion) has been mobilised for the State Budget.

This figure corresponds to average annual mobilisation of more than VND180 trillion, accounting for 10.6 per cent of the total social investment capital in 2018, 31 per cent of the State sector’s total investment capital in 2018.

About 1,872 auctions were held with an average successful mobilisation ratio of 60-70 per cent of the total bid volume.

The average annual interest rate of G-bonds has decreased by 4 to 6 per year for all maturities. In particular, there has been a sharp decline in 5-year terms, down from 10.49 per cent per year in 2009 to 3.55 per cent per year in 2019, and 10-year terms, down from 9.7 per cent per year in 2009 to 4.35 per cent per year in 2019.

In contrast to the decrease in interest rates, the maturities of bonds have increased.

So far, the State Treasury has successfully issued G-bonds with terms of up to 30 years.

Thanks to the diversity of maturities, investors have more options, which helps reduce the pressure to pay debts in the short term.

If in 2009, G-bonds were issued with only four maturities of 2, 3, 5 and 10 years, of which the maturities of 5-year and more accounted for only 15 per cent of total issuance. In 2019, three more maturities of 15, 20 and 30 years were added, and the maturities of 10 years and more accounted for 90 per cent of the total issuance.

In the secondary market, the number of G-bond transactions also increased. Bond liquidity in 2019 reached more than VND9 trillion per session, nearly 24 times higher than in 2009.

The trading volume through repurchase agreements (repos) also grew strongly, accounting for 6.5 per cent of the total trading value of the bond market in 2009 to 55 per cent in 2019.

With the ever-improving market legal framework, over the past 10 years, the G-bond market has continuously welcomed new products on both primary and secondary markets, meeting the diverse investment needs of the market.

In the years 2013, 2014, 2018 and 2019, Viet Nam’s G-Bond Market was named one of the markets with the strongest growth rate in East Asia by the Asia Development Bank (ADB).