Fixed – Income research

Monthly report May 15th, 2019

Fixed-Income Report Round-up

8.0% Bond yields
7.0%
April.2019 report
6.0%
In this issue 5.0%

 Round-up 4.0%

 Bond markets 3.0%

2.0%
 Interest rates 01/16

04/16

07/16

10/16

01/17

04/17

07/17

10/17

01/18

04/18

07/18

10/18

01/19

04/19
2Y 3Y 5Y 7Y 10Y 15Y

Source: Bloomberg, VCBS

 VND 12,576 billion (-11,90% mom) was mobilized on primary market. VND
175,690 billion (-12.34% mom) were traded on the secondary market in April 2019.
 Yield curve fluctuated in a tight band. According to Bloomberg statistics, yields
Le Thu Ha
for 1Y, 2Y, 3Y, 5Y, 7Y, 10Y and 15Y end April.2019 at 3.247% (-1 bps mom), 3.485%
+84 4 3936 6990 (ext.7182) (+11.2 bps mom), 3.592% (+8.4 bps mom), 3.915% (+3.7 bps mom), 4.267% (+6.7 bps
ltha_ho@vcbs.com.vn mom), 4.797% (-2.8 bps mom), 5.152% (+0.4 bps mom), respectively.
 Foreign net bought VND 48.18 billion.

Dang Khanh Linh  After rebounded at the beginning of April, interbank rates became steady. In the
+84 4 3936 6990 (ext.7183) first half of April, ON tenor peaked at 4,2%; however, according to Bloomberg statistics,
yields for 1Y, 2Y, 3Y, 5Y, 7Y, 10Y and 15Y ended April 2019 at 2.84%, 3.01%, 3.27%,
ltha_ho@vcbs.com.vn 3.48% and 4.08% decreased sharply compared to the previous month.
 SBV net withdrew VND 46,427 bn via OMO channel.

See Disclaimer at Page 7
VCBS Commentary
 In May, VCBS anticipate that bond yields are under more upward pressure but
the pressure if any shall not be overwhelmed. The expectations of market members
become significantly cautious when potential profits are not commensurate with risks and
a higher level of capital’s costs.

Macroeconomic, Fixed-Income,  The liquidity on the interbank market is expected to be stable and the average
Financial and Corporation interbank interest rates may continue to be higher than the same period last year, less likely
Information updated at to decrease sharply.
www.vcbs.com.vn/vn/Services/AnalysisResearch

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 Fixed-Income Report

BOND MARKETS

VND 12,576 bn (-11.90% mom)
worth of bonds were mobilized.
Primary Market
10Y and 15Y tenor bonds were mostly mobilized
VND 12,576 bn (-11.90% mom) worth of bonds were mobilized in April from the State
Treasury (ST) while winning volume focused on 10Y and 15Y tenors. In detail, VND 200 bn;
4,940 bn; 6,400 bn; 836 and 200 bn were mobilized in 5Y, 10Y, 15Y, 20Y and 30Y tenors,
respectively.
Winning rates remained in April. In detail, winning rate for 20Y decreased slightly 1 bp, while
winning rates for other tenors unchanged. Register-to-offering rate felt from 2.13 times last
month to 2.08 times this month. Winning-to-offering rate jumped from 51.91% to 67.65%.
Meanwhile, the Vietnam Development Bank (VDB) and Vietnam Bank for Social Policies
(VBSP) did not mobilize bonds this month.

50,000 Winning
rates
GB Auction results Vol (VND
Primary market 8.50% 12000
bn)
45,000
7.50% 10000
40,000
35,000 6.50% 8000

30,000 5.50% 6000

25,000 4.50% 4000

20,000 3.50% 2000
15,000 2.50% 0
May 02- May 04
May 21- May 25

Nov 26- Nov 30

Sep 24- Sep 28

Apr 08 - Apr 12
Nov 05-Nov 09

Jan 28- Feb 01

June 11 - June 15

Aug 13 - Aug 17

Mar 18- Mar 22

Oct 15- Oct 19
Sep 04 - Sep 09

Jan 07- Jan 11

Jul 02 - Jul 06
Jul 23 - Jul 27

Dec 17- Dec 21

Feb 25- Mar 01

10,000
5,000
0
Jan 18

Apr 18
Jun 18
Jul 18

Jan 19

Apr 19
Feb 18
Mar 18

Aug 18
Sep 18
Nov 18

Feb 19
Mar 19
May 18

Oct 18
Dec 18

Volume 5Y 7Y
ST VBSP VDB 10Y 15Y 20Y

Source: HNX, VCBS

State Tresury issuance plan updated:

On 24th April, State Tresury officialy released issuance plan for Q2.2019 with the total volume
of VND 80,000 bn. In our opinion, this plan is quite ambitious while the amount of matured
bonds in 2019 mostly focused on Q1.2019. The detailed plan is listed below.

Q2.2019 Issued in Issued in %completed %completed

Tenor 2019 Plan
plan 4M.2019 M4.2019 2019 Q2.2019
5Y 40,000 10,000 4,150 0 10.4% 0%
7Y 30,000 5,000 3,550 200 11.8% 4%
10Y 70,000 26,000 36,120 4,940 51.6% 19%
15Y 78,000 30,000 34,605 6,400 44.4% 21.3%
20Y 20,000 5,000 2,585 836 12.9% 16.72%
30Y 22,000 4,000 1,035 200 4.7% 5%
Total 260,000 80,000 82,045 12,576 31.6% 15.72%
Source:MOF, VCBS Research

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VND 175,690 bn (-12.34% mom)
traded on the secondary market.
Research Department VCBS
Fixed-Income Report
Macro updates:
 According to Nikkei, PMI in Vietnam reached 52.5 in April compared to 51.9 in the
previous month. Therein, job increased due to new order grew at a medium pace.
Meanwhile, GSO releases report on economic situation with same moderate growth
of manufacturing subsector. In detail, index of industrial production (IIP) increased
0.6% compared to the previous month and 9.3% growth recorded same period last
year. With these figures we still anticipate that GDP growth in Q2.2019 shall vary
from 6.67%-6.85%.
 CPI in April of 2019 increased by 0.31% compared to last month, which equivalent to
an increase of 2.93% over the same period of 2018. Therein, the main reason was
consumer demand grew due to price of gasoline and electricity. Howerver, the
decrease of foods and food stuff prevented CPI from climbing up strongly. In
addition, we believe that the government is still on the right track with the goal of
controlling inflation at around 4% for the whole 2019 with drastic and close
measures. CPI in May is will expected to increase 0.3%-0.5% mom.
 Throughout the SBV's legislative documents in recent years, we have seen a clear and
consistent message: (1) keep credit growth at a reasonable level, focus on growth’s
quality and efficiency; (2) operate monetary policy to keep stable interest rates and
appropriate deposit rates, maintain lending rates at a reasonable level; (3) continue to
deal with bad debts in accordance with the roadmap, plans and support the operations
of credit institutions. This orientation continues to be shown in the Draft Circular
amendmet to Circular 36 regulating the safety limits and ratios in the operation of
credit institutions and foreign bank branches being consulted for market members.
However, this means that the pressure on raising charter capital for banks will
increase significantly with effects such as increasing deposit interest rate level and
capital costs for the interbank market. Accordingly, VCBS adjusted the forecasts
for the increase of deposit interest rates for 2019 to 80 points compared to that of
increasing 50 points at the end of the year as mentioned in the previous report.
 After FOMC Meeting on April 30-May 1, Fed announced to keep the interest rate
unchanged of 2.25% - 2.5% and no rate cut in the near future as market expected.
This decision is considered as a suitable move in the context of stable economy and
the labor market.
 The latest movement around trade tensions between the US and China tends to
negatively affect market’s sentiment. In detail, The US Customs and Border
Protection Department has just announced a tax of USD 200 billion of Chinese
goods raised from 10% to 25% (May 10th). Shortly thereafter, the Ministry of
Commerce of China also announced the retaliatory morement. Besides, US-China
trade talks ended up with no deal in Washington.
Secondary market
Market liquidity remained in April.
VND 175,690 bn (-12.34% mom) traded on the secondary market. Market liquidity
decreased slightly compared to the previous month but the average trading volume remained
high at VND 9,247 bn (-3.12% mom). Therein, outright and repo value traded recorded at
VND 77,210 bn and VND 98,480 bn, respectively.
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 Fixed-Income Report

300
Secondary market

x1,000 bn
240

180

120

60

01/17

03/17

05/17

07/17

09/17

11/17

01/18

03/18

05/18

07/18

09/18

11/18

01/19

03/19
Outright Repo

Source: HNX,VCBS

Yield curve fluctuated in a tight band. According to Bloomberg statistics, yields for 1Y, 2Y,
3Y, 5Y, 7Y, 10Y and 15Y end April 2019 at 3.247% (-1 bps mom), 3.485% (+11.2 bps mom),
3.592% (+8.4 bps mom), 3.915% (+3.7 bps mom), 4.267% (+6.7 bps mom), 4.797% (-2.8 bps
mom), 5.152% (+0.4 bps mom), respectively.
In the beginning of April, bond yields robusted for almost all tenors; however, these pulled
back in the last week. The upward force may derive from interbank rates increased for
almost all tenors.

Yield curve 8.0% Bond yields

5.5
7.0%

4.5 6.0%

5.0%
3.5
4.0%

2.5 3.0%

2.0%
01/16
04/16
07/16
10/16
01/17
04/17
07/17
10/17
01/18
04/18
07/18
10/18
01/19
04/19
1.5
1Y 2Y 3Y 5Y 7Y 10Y 15Y
2/28/2019 3/29/2019 2Y 3Y 5Y
4/26/2019 7Y 10Y 15Y

Source: Bloomberg, VCBS

Bond yields decreased sharply in Q1.2019 as we expected in Annual report for fixed income
2018. In general, bond yields are unlikely to decrease further in the second phase, before
entering the uptrend when inflation risk factors may rise more in the third phase. In that
forecast scenario, bond yields are under greater upward pressure in May but the pressure if any
shall not be overwhelmed. The expectations of market members become significantly cautious
when potential profits are not commensurate with risks and a higher level of capital costs.
Despite the greater upward pressure on bond yields in May, there are some unchanged factors
for us to believe that this momentum will not be too strong: (1) In the domestic side,
macroeconomics stability is still quite good. (2) The decision of FED to keep interest rates will
reduce the possibility that investment capital flows will gradually move away from the frontier
and emerging markets. (3) Foreign direct investment robust, the number of new projects is
1,082 in April 20th with total registered capital of 5.3 billion USD, increase by 22.5% and
50.4%, respectively, over the same period in 2018.

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 Fixed-Income Report

Foreign investors net bought only Foreign investors net bought only VND 48.18 billion this month. Foreign investors extended
VND 48.18 billion this month their net bought position to six consecutive months, focused on 3Y and 10-15Y tenors.

4,050 Foreign investment in the secondary market 2018-2019

Net position (Unit: bn.VND)

2,933
2,530
1,254 2,121
1,681
1,429 1,445
1,209
789 963
624
270 422
215

-339 -335 -222 -275 48

-655
-1,274 -465
06/17
07/17
08/17
09/17
10/17
11/17
12/17
01/18
02/18
03/18
04/18
05/18
06/18
07/18
08/18
09/18
10/18
11/18
12/18
01/19
02/19
03/19
04/19
Source: HNX, VCBS

INTEREST RATE

After rebouned in the beginning of
April, interbank rates became steady.
Interbank Rates
After rebouned in the beginning of April, interbank rates became steady. In the first half
of the month, interbank rates increased strongly, ON tenor peaked at 4.2%. However, at the
end of April, interbank rate for ON-3M tenors were recorded at 2.84%, 3.01%, 3.27%, 3.48%
and 4.08%, decreased sharply compared to March. This indicated that liquidity returned to
the money market after abnormal demand had been met.
6.0%

4.0%

2.0%

0.0%
01/16

03/16

05/16

07/16

09/16

11/16

01/17

03/17

05/17

07/17

09/17

11/17

01/18

03/18

05/18

07/18

09/18

11/18

01/19

ON 1W 2W 1M

Source: Bloomberg, VCBS

The liquidity on the interbank market is expected to be stable, less likely to be shortfall in
May due to the supportive factors: (1) Tensional force on banking system liquidity in the
beginning of April may only be momentary and affected by the abnormal demand of some
commercial banks to ensure capital adequacy ratio. (2) The number of matured government
bonds remained at a relatively high level at VND 13,947 billion, equivalent to 11.66% of the
total matured volume in 2019, which will continue to support liquidity. (3) Public investment
from the beginning of the year to April 15 th reached VND 65.3 trillion, equaling 15.2% of the

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 Fixed-Income Report

plan. The figure increased slightly compared to 13.7% of the same period last year; however,
public disbursement is till behind the schedule. VCBS forecasts the disbursement may only
speed up from the second half of 2019. (4) No pressure on exchange rate while SBV has
bought USD 8.35 billion from the beginning of the year to April 25th, ensuring the local
currency is provided to the system. (5) Credit growth in Q1.2019 was 3.19%, lower than the
same period last year of 3.56% due to seasonal factors and policies.
The average interbank interest rate level may continue to be higher than the same period last
year, less likely to decrease sharply based on the following factors: (1) Investors are more
sensitive to the pressure of exchange rate in the context of uncertainty factors increased. (2)
The orientation to have banks reinforce international standard for safety was unchanged,
which shall create a certain pressure on the whole system when the resources of commercial
banks are substantially different.

Open market operation

SBV net withdrew VND 46.427 bn SBV net withdrew VND 46.427 bn via OMO channel. Therein, only about VND 501 bn
via OMO channel. worth of reverse repo was newly offered while more than VND 1,830 bn matured last month.
In addition, SBV also used repo activities to absorb part of the resource served to build
foreign reserve recently.

Reverse Repo SBV-Bill Outstanding

180
250
x VND 1,000 bn

x VND 1,000bn
160
140 200
120
100 150
80
60 100
40
50
20
- -
03/17
05/17
07/17
09/17
11/17
01/18
03/18
05/18
07/18
09/18
11/18
01/19

02/17
04/17
06/17
08/17
10/17
12/17
02/18
04/18
06/18
08/18
10/18
12/18
02/19
Source: Bloomberg, VCBS

END.

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 Fixed-Income Report

APPENDICES

Primary Market
St Bond
VDB VBSP Volmue
Month
Issued Issued Issued Issued Issued
5Y 7Y 10Y 15Y 20Y 30Y
Volume Volume Volume Volume Volume
04/18 6,055 2.97 3.43 4.1 4.47 5.12 5.42 0 0 0 6,055
05/18 11,178 3 N/A 4.26 4.6 5.14 N/A 0 0 0 11,178
06/18 16,940 3.1 N/A 4.37 4.7 5.20 N/A 0 0 0 16,940
07/18 15,420 3.45 3,9 4.48 4.78 5.22 5.42 0 350 0 15,770
08/18 16,060 3.5 3,9 4.63 4.87 N/A N/A 0 0 0 16,080
09/18 15,700 3.5 3,9 4.8 5.07 5.22 5.42 0 5,100 0 20,800
10/18 5,366 4.2 N/A 4.95 5.2 N/A N/A 0 2,940 0 8,306
11/18 10,220 N/A N/A 5.1 5.3 N/A N/A 0 0 0 10,220
12/18 28,450 N/A N/A 5.1 5.3 N/A N/A 16,545 0 0 44,995
01/19 36,344 3.8 4.17 4.8 5.12 5.59 5.80 0 0 0 36,344
02/19 18,850 3.63 4.05 4.7 5.00 5.56 5.79 0 0 0 18,850
03/19 14,275 3.70 N/A 4.72 5.06 5.20 5.85 0 0 0 14,275
04/19 12,576 N/A 4.05 4.72 5.06 5.69 5.85 0 0 0 12,576

Secondary Market
Bonds St-bills
Total
Month Outright Repo Outright Repo
04/18 117,127 140,244 - - 257,371
05/18 83,940 104,896 - - 188,836
06/18 112,344 70,399 - - 182,733
07/18 62,423 92,597 - - 155,020
08/18 62,332 84,661 - - 146,993
09/18 68,966 81,990 - - 150,956
10/18 55,760 89,321 - - 145,081
11/18 56,834 74,806 - - 131,640
12/18 77,194 83,527 - - 160,721
01/19 75,609 81,829 - - 157,438
02/19 68,127 76,721 - - 144,848
03/19 82,809 117,631 - - 200,440
04/19 77,210 98,480 - - 175,690

Open Market Operation

Reverse Repo Outright
Month
Due Offer Balance Outstanding Due Offer Balance Outstanding
04/18 2 2 0 0 191,210 78,500 (112,630) 78,580
05/18 170 170 0 0 80,280 55,840 (24,440) 54,140
06/18 0 0 0 0 54,140 150,499 96,359 150,499
07/18 15,993 17,993 2,000 2,000 112,500 44,461 (68,039) 82,461
08/18 37,167 42,869 5,702 7,702 35,312 28,482 (6,830) 75,630
09/18 15,401 8,155 (7,246) 456 50,000 52,950 2,950 78,581
10/18 16,018 60,562 44,544 45,000 62,591 15,070 (47,521) 31,060
11/18 237,878 237,663 (215) 44,785 2,100 0 (2,100) 28,960
12/18 25,929 32,208 6,279 51,064 28,960 0 (28,960) 0
01/19 184,354 280,582 93,228 144,292 0 0 0 0
02/19 188,097 64,776 (123,321) 20,972 0 0 0 0
03/19 50,248 30,911 (19,337) 1,635 54,499 59,399 4,900 4,900
04/19 1,830 501 (1,329) 306 37,101 82,199 45,098 49,998

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 Fixed-Income Report

DISCLAIMER
This report is designed to provide updated information on the fixed-income, including bonds, interest rates, some other related. The
VCBS analysts exert their best efforts to obtain the most accurate and timely information available from various sources, including
information pertaining to market prices, yields and rates. All information stated in the report has been collected and assessed as
carefully as possible.
It must be stressed that all opinions, judgments, estimations and projections in this report represent independent views of the analyst at
the date of publication. Therefore, this report should be best considered a reference and indicative only. It is not an offer or advice to
buy or sell or any actions related to any assets. VCBS and/or Departments of VCBS as well as any affiliate of VCBS or affiliate that
VCBS belongs to or is related to (thereafter, VCBS), provide no warranty or undertaking of any kind in respect to the information and
materials found on, or linked to the report and no obligation to update the information after the report was released. VCBS does not
bear any responsibility for the accuracy of the material posted or the information contained therein, or for any consequences arising
from its use, and does not invite or accept reliance being placed on any materials or information so provided.
This report may not be copied, reproduced, published or redistributed for any purpose without the written permission of an authorized
representative of VCBS. Please cite sources when quoting. Copyright 2012 Vietcombank Securities Company. All rights reserved.

CONTACT INFORMATION
Tran Minh Hoang Le Thu Ha Dang Khanh Linh

Head of Research Senior Analyst – Fixed income Analyst – Fixed Income

tmhoang@vcbs.com.vn ltha_ho@vcbs.com.vn dklinh@vcbs.com.vn

Research Department VCBS Page | 7