Vietnamese government bonds are assessed by observers to fluctuate "moderately" while yields in Japan, the UK, and Germany have reached decades-long peaks due to widespread selling pressure.
Vietnam government bond interest rates for terms of 5, 15, 20 and 25 years remained unchanged in the weekend trading session. The 2- and 10-year term interest rates decreased slightly compared to the previous session, at 3.87% and 4.43%, respectively.
This development is in contrast to the fluctuations of government bonds in many developed countries. In Japan, the 10-year yield just hit 3%, the highest since 1996. British and German bonds also reached more than a decade high, rising to 5.25% and 3.378%, respectively. In the US, yields have continuously escalated and are approaching their highest level in the past three years.
Bond yields in many countries have gone up due to a wave of sell-offs due to many reasons such as bulging public debt, the possibility of the Fed raising interest rates, and the Middle East conflict causing energy prices to increase and raising concerns about persistent inflation. When investors sell goods, the supply of bonds increases, causing prices to decrease and yields to increase, because these two indexes move in opposite directions.
Over longer periods of time, Vietnamese government bonds are in sync with the world's, but the reason is not from sell-off pressure. The 10-year yield increased by more than 0.4 percentage points compared to the beginning of the year (from 4% to 4.43%) and 0.9 percentage points compared to the same period last year. For the 30-year term, the increase compared to the beginning of the year was approximately 0.6 percentage points and about one point over the same period.
Government bonds are debt securities issued by a country's Ministry of Finance to mobilize capital for the budget or for specific programs and projects within the scope of state investment. Standard terms are 3, 5, 7, 10, 15, 20, 30 and 50 years.
According to Mr. Tyler Nguyen Manh Dung, Senior Director of Market Strategy Research at HSC Securities Company, domestic government bond yields are on the rise after bottoming out in early 2024, although operating interest rates remain unchanged and regulatory policies still lean more towards loosening than tightening.
Comparing with markets in Southeast Asia, Mr. Dung ranked Vietnam in the group with rapidly increasing yields. According to him, this reflects the expectation of becoming an economy with the leading growth rate in the region, leading to a corresponding increase in investment capital demand.
Vietnamese government bonds are assessed by observers to have more moderate fluctuations than those in the world. While yields in many countries have exceeded peaks of more than a decade, in Vietnam they are fluctuating 3.6-4.7% depending on the term, about one percentage point lower than in 2022-2023.
The current level is also significantly lower than 10 years ago, a period when yields fluctuated strongly due to high interest rates and macro risks. Specifically, the 5-year yield is 1.64 percentage points lower. The 10- and 20-year terms are 2.5 and 3.5 percentage points lower, respectively.
Ms. Hoang Viet Phuong, Director of S&I Credit Rating Joint Stock Company, said that government bond yields have increased since the middle of last year, earlier than other countries, and continued into this year at a slow pace. Therefore, the yield curve slope is negligible.
According to her, similar to other financial assets, global government bond yields are mainly influenced by supply and demand in the market. High and persistent inflation causes investors to demand higher term premiums. Soaring demand for public investment and forecasts of larger public debt in the future also put pressure on bond yield curves in many countries.
Ms. Phuong believes that these indicators in Vietnam are still at a safe level. By the end of last year, the ratio of public debt to GDP was about 35-36%, lower than the ceiling of 60%. The Government's direct debt repayment obligation compared to state budget revenue is about 20-21%, while the ceiling is up to 25%.
Sharing the same opinion, Mr. Diep Quoc Khang, Senior Director of Bond Operations at Dragon Capital Investment Fund, said that Vietnamese government bonds have different growth dynamics and lower sensitivity than many developed countries.
He pointed out factors affecting domestic bond yields including high credit growth, exchange rate fluctuations, increased issuance demand, liquidity tensions in the interbank system... In other countries, especially the US and Japan, stories about fiscal policy, inflation, investment in AI and risk compensation play a dominant role in yield trends.
In this aspect, Mr. Tyler Nguyen Manh Dung also acknowledged that the increase in Vietnam's bond yields largely comes from internal supply and demand and credit, while in developed countries it is mainly due to the impact of global monetary policy and large-scale trading behavior.
Vietnamese government bonds are considered to have a relatively high level of "isolation" from international capital flows, but are not completely immune in terms of interest rate pricing. In other words, bonds are not as easy to be sold off directly as markets with a large proportion of foreign investors, but are still influenced through US Government bond yields, USD/VND exchange rates, liquidity and global interest rates.
According to Dragon Capital experts, this "isolation" comes from the low proportion of foreign ownership and the limited level of integration with global emerging bond indices. Foreign investors only hold about 0.1-0.15%, lower than many countries in the region such as the Philippines (5%), Thailand (9.3%), Indonesia (12.8%) or Malaysia (34.2%).
Therefore, according to Ms. Hoang Viet Phuong, this helps yields in Vietnam be more stable during periods of global volatility.
