Fixed income market review
Tight liquidity in the interbank market persisted as the ON and 1W rates
remained high at ~3.5 – 4.0% pa last week. However, the State Bank of Vietnam
(SBV) withdrew ~VND 4.4tn in net terms through open market operation. In fact,
some private and State – owned banks raised their long-term deposit rates by 20
– 30 bps due to increased proportion of mid and long-term loans. In the
corporate – tier market, interest rates maintained their upward momentum with
1M interest rates approaching 5.0 – 5.3% pa, up from 4.8 – 5.0% pa in the
previous week.
In the primary Government bond market, the Vietnam State Treasury (VST)
failed to issue the entirety of VND 4,500bn G-bonds given rising interest rate
environment. In particular, the VST managed to place VND 495bn out of VND
2,500bn 5Y G-bonds at hiked accepted yield of 6.4%, up 40 bps compared to the
previous auction. Meanwhile, the VST offloaded VND 240bn out of VND 1,500bn
15Y G-bonds at winning yield of 7.62%, up 2 bps against the previous auction.
Notably, the VST reissued VND 1,250bn 13W T-bills at 4.08%, and VND 2,200bn
26W T-bills at 4.8%. Given the rally of winning yield in the primary market,
trading yields climbed by 15 – 30 bps in the secondary market. Meanwhile, total
transaction value grew by ~20% WoW to VND 19.3tn with most of the attention
centering on repo transactions as banks attempted to technically book their profit
before the end of the second quarter.
We maintain our negative view over the Government bond market in the coming
time as per our previous reports. Increased lending at banks associated with
rising interest rate environment will likely threaten available capital for G-bond
investment, thus augmenting yields further.