Looking back at the 2023 bond market: A tumultuous year filled with a wide range of emotions

The year 2023 has come to an end, marking a "bleak" year for the corporate bond market. In contrast, the government bond market has shown resilience as many investors return to long-term investments.


Government bonds issued 1.38 times more than in 2022

According to statistics as of December 25, 2023, the value of Government bonds (TPCP) issued during the year reached VND 296.678 trillion, 1.38 times higher than in the whole of 2022, accounting for 74.2% of the year’s plan (VND 400.000 trillion), and 78.1% of the adjusted plan for the year (VND 380.000 trillion).

Of which, 100% of the issued bonds have a term of 5 years or more; the average term of issuance of TPCP is 12.54 years, a decrease of 0.1 year compared to the 2022 average (12.67 years). The average interest rate of TPCP issuance by the end of December 2023 was 3.21% per year, a decrease of 0.27% compared to the 2022 average (3.48% per year). In 2023, guaranteed TPCP bonds were issued VND 21.250 trillion.

According to the announcement of the State Treasury, in the fourth quarter of 2023, the State Treasury carried out auctions of TPCP through the Hanoi Stock Exchange with an amount of VND 130 trillion. Thus, by the end of November, the State Treasury had mobilized VND 298.481 trillion of TPCP, equivalent to nearly 75% of the 2023 issuance plan.

Corporate bond market gradually recovers

As of the end of 2023, the corporate bond market (TPDN) showed signs of recovery, as some investors became interested again due to better interest rates compared to other investment channels. This has been demonstrated in the TPDN market as in the first quarter, there were almost no issuances, but from the second quarter onwards, the issuance volume increased each month compared to the previous month. Especially in the third quarter, TPDN issuance activities increased sharply with a value 2.7 times higher than the previous quarter and a 36.2% increase compared to the same period.

By the end of December 2023, the total value of TPDN issuance reached VND 268 trillion, a 1% decrease compared to the same period in 2022. The amount of repurchased TPDN before maturity reached VND 230.2 trillion, a 5.8% increase compared to the whole of 2022. The average interest rate of TPDN in the 12 months of 2023 was 8.3%, higher than the 2022 average of 7.9%.

Of which, bank bonds had the highest issuance value with around VND 138.300 trillion, a 1% increase compared to the end of 2022, accounting for 56.2% of the total value. The average coupon rate of bank bonds was 6.7% per year, and the average term was 4.8 years.

The TPDN market is mainly composed of institutional investors, accounting for 93.2%, of which commercial banks accounted for 54.5% of the number of institutional investors. Individual investors accounted for about 6.8% of the whole market.

Commenting on the TPDN market in 2023, Mr. Nguyen Hoang Duong – Deputy Head of the Finance Department of Banks and Financial Institutions (Ministry of Finance) said that the issuance results in the TPDN market have improved and become more positive. This is the result of the strong guiding and managing policies of the Government and the transformation of entities participating in the market.

“In 2023, to support the TPDN market, the Government promptly issued Decree 08, which includes policies to suspend the implementation of provisions in Decree 65 as well as policies that allow businesses and investors to negotiate, defer, and exchange already issued bonds with risk-sharing spirit, harmonious interests among the parties,” Mr. Duong said.

The independent TPDN trading system at the Hanoi Stock Exchange was launched on July 19, 2023.

2023 also marked the birth of the independent TPDN trading system at the Hanoi Stock Exchange since July 19, 2023. As of December 25, 2023, there are 822 bond codes registered for trading on the independent TPDN trading system of the Hanoi Stock Exchange. The total trading value reached VND 189.976 trillion, with an average session trading value of over VND 1.600 trillion/session.

Building and operating the independent TPDN trading system is a multi-purpose solution, providing management agencies, market members, and investors with additional information about the TPDN market from the primary to the secondary level; strengthening the effectiveness of management and supervision by the management agency regarding compliance with legal provisions on corporate bond transactions.

At the same time, the independent TPDN trading system also contributes to promoting liquidity for the TPDN market, increasing the responsibility of investors in bond trading activities. Thereby, contributing to improving the efficiency of the stock market in general and the TPDN market in particular.

Bonds are still a prioritized capital mobilization channel in 2024

In the new year 2024, the pressure to find financial resources to continue developing new projects still weighs on businesses’ shoulders. In the context that other sources of capital mobilization are still facing bottlenecks, bonds are still a preferred choice.

However, 2024 is also the year with the highest bond debt repayment amount in the past 3 years, reaching over VND 330 trillion. Of which, real estate businesses accounted for nearly half of the total debt.

According to experts, in 2024, enterprises need to solve 3 problems: the first is negotiation with investors to continue to extend and reschedule debts. Secondly, if investors do not agree, there must be a source to pay. The third is the pressure of cash flow for redevelopment.

Mr. Kang Moon Kyung, CEO of Mirae Asset Securities Company, commented: “The gradual recovery of the corporate bond market partly depends on the recovery of real estate business activities. This year, with many positive signals, Mirae Asset expects real estate businesses to have the ability to repay debts and have higher profits.”

Dr. Can Van Luc, member of the National Financial and Monetary Policy Advisory Council, said that when the economy recovers, businesses need capital and TPDN becomes more important. Therefore, it is necessary to have appropriate solutions in order to develop a sustainable, transparent, and effective market, which creates a channel for capital mobilization for enterprises, ensures liquidity for the economy, and gradually develops a balance between the capital market and the NH credit market.

Besides challenges, the TPDN market in 2024 still has many bright spots. According to Dr. Le Xuan Nghia, an economist, in 2024, interest rates in major economies such as the US and Europe may decrease, attracting capital inflows to developing countries with recovery potential like Vietnam. Domestic interest rates in 2024 are also forecasted to remain at a low level, which will be a good support for TPDN issuance.

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