Viet Nam’s local currency bond market expanded during the third quarter of this year. — Photo baotintuc.vn

Viet Nam’s local currency bond market expanded during the third quarter of 2019, according to the latest issue of the Asian Development Bank’s (ADB) Asia Bond Monitor.

The issue shows that at the end of September, Viet Nam had US$55.1 billion in paper outstanding, 3.4 per cent higher on-quarter and 1.9 per cent higher on-year in local currency terms.

This expansion was due mainly to a 4 per cent on-quarter growth in Government bonds to $51.0 billion as the State Bank of Viet Nam increased issuance of central bank bills.

The overall expansion of the country’s local currency bond market was slightly tempered by a 2.8 per cent contraction on-quarter in the corporate bond market to $5 billion. The corporate bond market still posted growth of 4.2 per cent year-on-year.

Viet Nam is one of emerging East Asia bond markets. Others comprise China, Hong Kong, Indonesia, the Republic of Korea, Malaysia, the Philippines, Singapore and Thailand.

ADB Chief Economist Yasuyuki Sawada said the ongoing trade dispute between China and the US and a sharper-than-expected economic slowdown in advanced economies and China continue to pose the biggest downside risks to the region’s financial stability.

“However, monetary policy easing in several advanced economies is helping to keep financial conditions stable,” Yasuyuki said.

Local currency bonds outstanding in emerging East Asia reached $15.2 trillion at the end of September, marking 3.1 per cent higher than at the end of June.

Local currency government bonds outstanding totaled $9.4 trillion, accounting for 61.8 per cent of the total, while the stock of corporate bonds was $5.8 trillion. A total of $1.5 trillion in local currency bonds were issued in the third quarter, up 0.9 per cent versus the previous three months.

China remained emerging East Asia’s largest bond market at $11.5 trillion, accounting for 75.4 per cent of emerging East Asia’s outstanding bonds. Indonesia had the fastest-growing local currency bond market in the region during the third quarter, boosted by large issuance of treasury bills and bonds.

A special theme chapter examines the relationship between bond market development and the risk-taking behavior of banks. The analysis finds that well-developed bond markets reduce the overall risk of banks and improve their liquidity positions. This suggests bond market development can contribute to the soundness of the banking system. — VNS