Liquidity of G-bonds in the secondary market drops sharply

29-Jul-2021 Intellasia | VnEconomy | 5:02 AM Print This Post

The weekly bond market report for the week from July 19th to 23rd of Saigon Securities Incorporation stated that the Outright and Repos transaction values on the secondary market reached an average of 8.861 trillion dong per session, lower than the 10.936 trillion dong per session recorded in the previous week. This is also the lowest transaction value since March 2021.

In the last week, the government bond (G-bond) yields on the secondary market were less volatile. Closing the session on July 23rd, the yields were 0.34 percent on one-year tenor (unchanged), 0.57 percent on two-year tenor (unchanged), 0.87 percent on three-year tenor (up by 0.01 percentage point),1.06 percent on five-year tenor (up by 0.01 percentage point), 1.33 percent on seven-year tenor (up by 0.002 percentage point), 2.16 percent on 10-year tenor (unchanged), 2.44 percent on 15-year tenor (up by 0.005 percentage point), and 3.07 percent on 30-year tenor (down by 0.001 percentage point).

In addition, foreign investors’ buying and selling was quite balanced in the past week. From the beginning of the year until now, foreign investors have net purchased about 10.95 trillion dong.

In the primary market on July 19th, the Bank for Social Policies continued to offer three trillion dong of 10-year and 15-year bonds. Because the difference between the winning yield of this bond and that of the State Treasury’s bonds on 10-year tenor remains at an attractive level, all the bonds offered by the Bank for Social Policies on 10-year tenor were issued. In contrast, since the 15-year bond yield was not attractive, the offer of the Bank for Social Policies was unsuccessful.

On July 21st, the State Treasury’s nine trillion dong offer recorded a significant decrease in registered volume and winning rate. In particular, all 1.5 trillion dong of five-year bonds, 2.4 trillion dong of 10-year bonds (out of three trillion dong), 2.268 trillion dong of 15-year bonds (out of three trillion dong), and all 1.5 trillion dong of 30-year bonds were mobilised.

The five-year winning bond yield was 1.05 percent per annum (down by 0.03 percentage point), and the yields for other tenors remained unchanged compared to the previous bid, reaching respectively 2.15 percent per annum, 2.43 percent per annum, and 3.05 percent per annum.

According to experts, the decline in liquidity on the secondary market and the registration rate as well as the winning volume in the primary market was due to the stricter implementation of social distancing requirements, including Directive 16 which is implemented in many localities throughout the country, leading to an increase in people’s needs for cash. This partly made the system liquidity to be less abundant and the G-bond channel also cooled down.

The State Treasury has currently announced a plan to issue 120 trillion dong of G-bonds in the third quarter of 2021, up by 20 percent compared to the plan in the first and second quarters. The 10-year and 15-year G-bonds continue to account for a large proportion (90 trillion dong).

In the case when all the issuance plan in the third quarter of 2021 is successfully implemented, the total G-bond volume to be issued in the first nine months of 2021 will reach 261.5 trillion dong, up by 14.3 percent over the same period in 2020.

However, the volume of G-bonds matured in 2021 is much higher than last year, causing the net issuance volume to be only 161 trillion dong, down by 31.5 percent over the same period of 2020.

Thus, the research team at SSI said that the G-bond yields will continue to level off in the short term.

In recent developments, the G-bond repurchase of the State Treasury is expected to bring a new breeze to the G-bond market with the participation of investors, especially the State Treasury, which will promote the trading of G-bonds in the secondary market and provide liquidity support to market members.

Specifically, the first auction to buy back G-bonds of the State Treasury jointly organised by the Hanoi Stock Exchange (HNX) and the State Treasury was successful on July 13th. The auction was implemented on the G-bond repurchase system (abbreviated as ABBS system) built and developed by the HNX.

In this session, the State Treasury offered 800 billion dong of G-bonds with a term of 14 days. Five members participated in the bid, and the total bidding volume of 1.150 trillion dong. As a result, the winning volume was 300 billion dong with two winning members.


Category: Finance, Vietnam

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