The corporate bond market is experiencing a quiet period, evidenced by only 5 successful issuances in March, totaling approximately 16,200 billion VND. In the first three months of the year, businesses raised 24,800 billion VND through corporate bonds. This figure represents a 33% increase compared to the same period last year, yet it is less than half of last December's total.

Banks and real estate continue to dominate issuance value, accounting for a combined 90%. The remaining issuances came from consumer, industrial, and securities companies.

Analyzing the market's subdued activity, analysts from VIS Rating attribute the primary cause to seasonal factors, including the extended Lunar New Year holiday. Additionally, many issuers are exercising caution as they await approval of business plans from their annual general meetings.

VIS Rating forecasts that new bond issuance volumes this year may be impacted by the conflict in the Middle East. According to the group, escalating energy prices will pressure inflation, limit the scope for monetary easing, and push interest rates higher, consequently increasing capital raising costs for both banks and businesses.

"Business and investor confidence may decline in a prolonged conflict scenario", the analysts noted. "This could lead businesses to postpone investment plans, limit issuance demand, and affect their ability to refinance through the corporate bond market."

Last year, banks and businesses raised nearly 590,000 billion VND through corporate bonds. FiinRatings expects this figure to reach 800,000 billion VND this year, surpassing the peak period of 2021.

Le Hong Khang, Director of Research and Analysis at FiinRatings, identified three drivers for growth in the primary corporate bond market: First, a series of reforms have brought legal clarity, strengthening investor confidence. Second, banks need to raise tier two capital to meet capital adequacy requirements. Finally, the demand for funding large-scale infrastructure projects is shifting from banks to corporate bonds due to credit growth limits.

However, Khang emphasized that beyond expanding issuance scale, the market needs to develop in depth. Key aspects for assessing this depth include the diversity of issuers, product structures, the yield curve, and the level of information transparency. This development would help bond investors better price risks and improve the economy's ability to meet medium- to long-term capital needs.

Currently, up to 91% of issuance volume is via private placement, and banks issue over 70% of bonds. Nearly 60% of corporate bonds circulating in Vietnam have floating interest rates, a very high proportion compared to regional markets such as Malaysia at 7,6%, Singapore at 0,6%, or Thailand below 0,1%.

This reality stems from the practice in Vietnam's capital market, where interest rates are pegged to the 12-month deposit rates of major banks. According to experts, this presents a paradox for the current bond market: bonds are inherently fixed-income instruments, yet in practice, capital costs and investment yields fluctuate significantly with deposit interest rates.

Phuong Dong