Vietnam\'s bond market has experienced a significant year-on-year rise in growth during early 2011 compared with 2009 and 2010.
This compares to several regional countries that have shown a significant decline. Experts say this shows Vietnam\'s strong resilience in a volatile global financial environment.
The Asian Development Bank\'s Asia Capital Markets Monitor for August stated that with only USD16 billion worth of total bonds outstanding, Vietnam\'s local currency bond market grew 42.8 per cent year-on-year in Quarter One this year after expanding 34.2 per cent in 2010, making it the fastest-growing bond market in Asia since 2009.
Malaysia and India were the second- and third-fastest growing markets.
Vietnam was also listed among corporate bond markets with the most consistent year-on-year growth in 2009, 2010 and the first quarter of 2011, together with mainland China, India, Indonesia and the Republic of Korea.
Vietnam, the smallest corporate bond market of $1 billion in the region, grew by an impressive 28.8 percent year-on-year in Q1 this year compared to the same period last year, the Manila-based bank stated.
On the other hand, Vietnam, India and Malaysia were three outliers for budget deficits of 5.6-8.1 percent of GDP in 2010, which resulted in a decline in Government bond issuance.
The Government bond yield curve in emerging Asian markets from the end of 2009 through 30 June, 2011, has seen an overall flattening trend. In Vietnam, however, the curve steepened between the end of 2009 and the end of 2010, with yields falling on bonds with maturities of five years or less and rising from the belly through the end of the curve.
Between the end of December 2010 and the end of June 2011, government bond yields in Vietnam rose for all maturities. Due to accelerating inflation, the government bond benchmark yield for the one-year tenor rose to 12.57 per cent by the end of June, higher by 224 basic points (bps) than at the end of December 2010. Yields for two-year maturities rose by 163 bps and for three-year maturities by 146 bps. Meanwhile, the increase in yields at the belly to the longer end of the curve was less, ranging between 52 bps and 97 bps.
However, Vietnam\'s bond market was the region\'s smallest as a percentage of GDP at the end of Q1 2011, equalling to 15.8 per cent. The Republic of Korea was the single largest bond market, measuring 111.4 percent of the country\'s GDP at the end of Q1 2011.
The Asia Capital Markets Monitor reviews emerging Asia\'s stock, bond and currency market and assess their outlook, risks and policy implications.
The report this month advised that the region should build up strong fundamentals and interest rate differentials to reignite capital inflows later this year.
