December 16, 2019 13:29

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Looking back on the10-year development of the Government bond market

16:00 | 15/12/2019

VCN - On December 10, the Ministry of Finance organized a conference on the 10-year operation and development of the Government bond market.  

looking back on the10 year development of the government bond market Nearly 169.5 million USD mobilised from Government bonds
looking back on the10 year development of the government bond market Ten years of development of the Government bond market
looking back on the10 year development of the government bond market In the first half of 2019, disbursement of investment capital via the State Treasury reached over 31%
looking back on the10 year development of the government bond market
The conference

Key role in developing the capital market

Speaking at the Conference, Pham Thi Thu Hien, Director of Department of Banking and Financial Institutions, Ministry of Finance said that on September 24, 2009, the specialized Government bond market was officially launched and put into operation, thereby all bidding activities for bond issuance and trading are implemented at Hanoi Stock Exchange to meet capital mobilization requirements for development investment, contributing to improving the structure of Vietnam’s capital market and financial market.

“So far, after 10-year operation, the Government bond market has grown in both size and liquidity and played a key role in developing the capital market and the bond market. The Government bond market has operated in accordance with international practice from the publication of issuance plans, products, issuance methods and procedures to registration, depository, listing and trading in the secondary market,”Hien said.

She also added the Government bond market size until the end of November 2019 was equal to 25.1 percent of GDP in 2019, 12 times higher than in 2009. Average transaction volume in the first 11months of 2019 reached VND 9,000 billion per session, up 24 times compared to 2009, equal to 0.9 percent of the listed bond obligation. Vietnam's Government bond market has grown at an average rate of 27 percent annually over the past decade, the highest growth rate among emerging economies in East Asia.

Hien said that in the past 10years, Vietnam’s Government bond market has achieved outstanding results.

“Policies guiding the Law on Public Debt Management and the State Budget Law have been enacted to create an important legal foundation for the operation of the Government bond primary and secondary markets as well as restructuring the portfolio of government bond debt in a sustainable manner. In particular, after the 2017 Public Debt Management Law was issued, the entire legal framework guiding government bond issuance and trading activities continued to be revised, renewing the procedures of issuing Government bonds according to bidding methods and underwriting for the issuance according to international practices. Thereby, creating a legal basis for the development of new products and improving the operation of the secondary market.”

The Government bond market has become an effective medium and long-term capital mobilization channel for the State budget. The Government bond issuance has been linked to the restructuring of Government debt sustainably.

Moreover, Government bond products have been increasingly diverse, a safe and effective investment tool for all types of investors. In the Government bond market, there have been many new investors besides commercial banks.

A safe and effective investment tool

According to the Director of the Department of Finance of Banks and Financial Institutions, in the following years, especially in 2021-2025, the goals set out are developing the Government bond market as a foundation for the development of the bond market and the financial market; making Government bondsa safe, effective and highly-liquid investment tool for commercial banks, insurance systems, investment funds and foreign investors.

To achieve these goals, for the primary market, it is necessary to link the Government bond capital mobilization with the administration of the State budget and the management of State funds; specify the annual mobilized capital volume, publicise the, volume and term of bond issuance in detail on a quarterly basis so investors can actively arrange capital contribution.

For the secondary market, Hien said it is necessary to improve the market organization model and trading system, further reduce procedures from issuance to registration, depository, listing, trading and payment of bonds in line with the development orientation of technology 4.0 to increase liquidity in the secondary market.

Another important goal is diversifying the investor system in the Government bond market, giving priority to developing long-term investors. Reviewing mechanisms and policies to develop bond investment funds and voluntary pension funds; renovating the investment mechanisms of Vietnam Social Insurance towards becoming more professional.

looking back on the10 year development of the government bond market Government bond futures contracts to be launched

Finally, Hien affirmed: “Following the achievements, in the future, we will actively participate in international and regional cooperation programs and forums such as ASEAN, ASEAN + 3, bond market forums of emerging countries and green bond market to cooperate for the development of the bond market and the Government bond market. Strengthening cooperation with international organisationssuch as the World Bank, Asian Development Bank, British Embassy,German Agency for International Cooperation, Japan International Cooperation Agency and the State Secretariat for Economic Affairs to learn, and share experience and information to approach international standards and practices.”

By Thuy Linh/ Huyen Trang