Vietnam’s local currency bond market posted yearly growth of 31.7% to reach VND1,640.8 trillion (US$71 billion), according to the latest edition of the Asian Development Bank (ADB)’s Asia Bond Monitor.

Government bonds outstanding totaled VND1,358.3 trillion (US$58.73 billion), rising 7.1% quarter-on-quarter in the fourth quarter of 2020. Corporate bonds outstanding increased at a much faster rate of 13.6% quarter-on-quarter to VND282.5 trillion (US$12.21 billion).

Government and corporate bonds comprised 82.8% and 17.2% of the local currency bond market, respectively, at the end of December 2020.

Corporate bond issuance in Vietnam dropped 31.6% quarter-on-quarter in the October-December period of last year to VND45.6 trillion (US$1.97 billion) due to the implementation of Decree No. 81/2020/ND-CP, which tightened regulations on corporate bond issuance effective 1 September 2020.

For the emerging East Asia region, local currency bond markets expanded to US$20.1 trillion by the end of 2020, 3.1% higher than the preceding quarter and 18.1% higher than a year earlier, for which the ADB cited an improving global economic outlook and progress on the Covid-19 vaccinations as major factors.

“Bond markets in emerging East Asia continued to grow, mobilizing funding for the region’s sustainable recovery from the pandemic,” said ADB Chief Economist Yasuyuki Sawada. “Successful vaccination campaigns, accommodative monetary policy stances, and easing of restrictions are spurring economic activity and shifting the recovery into higher gear.”

Emerging East Asia comprises China; Hong Kong (China); Indonesia; South Korea; Malaysia; the Philippines; Singapore; Thailand; and Vietnam.

Vaccine rollouts have started in most markets in the region, lifting confidence, according to the report. At the same time, the uncertainty of the pandemic’s trajectory, particularly with regard to new variants and a possible resurgence in cases, continue to weigh on the development outlook. Uneven vaccine access and a potential adjustment in asset prices due to an escalation of long-term interest rates also pose risks.

Government bond yields in most advanced economies and emerging East Asian markets increased between December 31, 2020 and February 15, 2021. Meanwhile, improved sentiment boosted most equity markets and regional currencies. Capital flows into the region’s equity and bond markets also recovered in the last quarter of 2020.

Government bonds dominated the region’s bond stock at US$12.4 trillion as of the end of December, while corporate bonds amounted to US$7.7 trillion. China remained the region’s largest bond market, accounting for 77.4% of emerging East Asia’s total bond stock.