Secondary bond market attracts record foreign purchases

By VPBS, Dam Tuan   April 19, 2016 | 07:55 pm GMT+7

In the first quarter of 2016, foreign investors made net purchases on the secondary bond market worth a total VND6.33 trillion ($284 million).

In Q1, the total bond and treasury note transactions on the secondary market through outright and reverse repo reached VND258.99 trillion (about $11.6 billion), an increase of nearly 30 percent compared with the last quarter of 2015 and 9.45 percent higher than the same period last year.

Outright transactions continued to play a dominant role on the secondary market with 63.16 percent of total transaction value while reserve repo jumped 42.21 percent from the previous quarter, making up 38.84 percent of market value.

secondary-bond-market-attracts-record-foreign-purchases

Vietnam's secondary bond market hit record highs with foreign investors in Q1. Photo by VnExpress

Foreign investors sold a net value of VND4.4 trillion in Q4 and VND1.37 trillion (over $61 million) for the whole of 2015.

Based on timely monetary policies issued by the State Bank of Vietnam and increased remittance sources, foreign investors reached a record high net-buy of VND6.33 trillion ($284 million) on the secondary bond market in the first quarter of 2016.

On the secondary market, bond yields decreased from six to 25 basis points compared with the start of the year. Yields for three and five-year bonds dropped strongly from 23 to 25 basis points to 5.57 percent and 6.39 percent, respectively.

According to VPBank Securities (VPBS), bond yields could climb thanks to a number of factors including: (1) increased inflation; (2) commercial banks raising borrowing interest rates; (3) cash flow transfered to credit based on the demand for capital in Q2; (4) the pressure to issue government bonds to ensure the state budget.