The central exchange rate increased by 15 VND, the VN-Index increased sharply by 37.15 points (+3.17%) compared to the previous weekend, or the Ministry of Finance announced a plan to issue 400,000 billion VND of government bonds in 2024 through the State Treasury... are some notable economic news in the week from February 5-16.
| Economic news review February 15 |
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| Economic news review |
Overview
The Ministry of Finance announced a plan to issue VND400,000 billion in government bonds in 2024 through the State Treasury, of which VND127,000 billion will be issued in the first quarter.
In 2023, the State Treasury successfully mobilized VND 298,476 billion in government bonds, reaching 98% of the adjusted plan assigned by the Ministry of Finance to the State Treasury (VND 305,000 billion) and increasing by 39% compared to 2022. The average issuance term of government bonds is 12.58 years, exceeding the target of an average issuance term of 9-11 years set by the National Assembly in Resolution No. 23/2021/QH15.
The average remaining maturity of the government bond portfolio is 9.05 years. The issuance maturity is concentrated at 5 years or more to continue restructuring the government bond portfolio towards extending the maturity, reducing short-term debt repayment pressure and borrowing costs, contributing to restructuring public debt safely and sustainably.
The average interest rate for government bond issuance in 2023 is 3.21%/year, down 0.27% compared to the average in 2022 (3.48%/year). The total payment volume of government bonds is VND 184,588 billion, of which the principal is VND 100,966 billion and the interest is VND 83,622 billion. In 2023, government-guaranteed bonds were issued VND 21,250 billion.
In 2024, the State Treasury said that the plan to auction government bonds through the Hanoi Stock Exchange is VND400,000 billion (including the volume issued to Vietnam Social Security). The amount of government bonds maturing in the whole year of 2024 is VND72,000 billion.
In a recent dispatch on the organization and management of the state budget and the central budget, the Ministry of Finance requested the State Treasury to preside over and coordinate with the Department of Banking and Finance to organize the issuance of government bonds in the market for domestic borrowing needs of about VND 127,000 billion (including mobilization for Vietnam Social Security) in the first quarter of 2024. Capital mobilization will continue to focus on long-term terms of 5 years or more, meeting the target of an average issuance term of government bonds of 9-11 years.
It can be predicted that government bond issuance activities in 2024 will be affected by many factors. Specifically, monetary policy factors in the international market will be basically favorable, accordingly, exchange rate pressure will decrease this year. Domestically, inflation is also within the target. Thus, the current monetary policy status of the State Bank will likely continue to be maintained in 2024 to support economic growth and facilitate government bond trading organizations.
In addition, with support from the low interest rate environment, government bond yields are likely to continue their bottoming trend at least in the first half of 2024, then fluctuate in the second half when the market becomes active again due to improved credit factors or public investment disbursement.
According to information compiled by the Hanoi Stock Exchange (HNX), the volume of government bonds mobilized from the beginning of the year to January 31, 2024 was VND 16,502 billion with an average issuance term of 13.35 years; the average issuance interest rate was 2.19%/year.
Updating new documents related to the issuance of government bonds, on November 29, 2023, the Government issued Decree No. 83/2023/ND-CP amending and supplementing a number of articles of Decree No. 95/2018/ND-CP dated June 30, 2018 on the issuance, registration, depository, listing and trading of government debt instruments on the stock market. This Decree takes effect from January 15, 2024.
According to this Decree, when issuing government bonds privately, the State Treasury can choose commercial banks and foreign bank branches to act as agents, instead of selling directly and making payments to buyers as before. Commercial banks wishing to become agents selling government bonds must meet the following conditions: they must be commercial banks and foreign bank branches legally established and operating in Vietnam; must have the function of providing bond issuance agency services according to the provisions of the Law on Credit Institutions and instructions of the State Bank; must have an operating network to meet the distribution and payment of government bonds; must have a plan to organize the distribution and payment of government bonds that meets the requirements of the State Treasury for each issuance.
According to the leader of the State Treasury, the return to the method of selling individual government bonds is to implement in urgent cases where it is necessary to mobilize resources from the entire population, selling directly to businesses and individuals.
Domestic market summary week from February 5-16
Foreign exchange market: During the 5 working days from February 5-16, the central exchange rate was adjusted up and down by the State Bank of Vietnam alternately through the sessions. At the end of February 16, the central exchange rate was listed at 23,971 VND/USD, up 15 VND compared to the previous weekend session on February 2.
The State Bank of Vietnam's transaction office continued to list the USD buying price at 23,400 VND/USD, while the USD selling price at the end of the week was listed at 25,119 VND/USD, 50 VND lower than the ceiling exchange rate.
The interbank USD-VND exchange rate fluctuated in an upward trend during the five working sessions before and after the holiday. At the end of the session on February 16, the interbank exchange rate closed at VND24,520/USD, up VND80 compared to the session on February 2.
Exchange rates on the free market increased before and after Tet. At the end of the session on February 16, the free exchange rate increased by 145 VND for buying and 185 VND for selling compared to the previous weekend session, trading at 24,950 VND/USD and 25,050 VND/USD.
Interbank money market, in 5 working days from February 5-16, interbank VND interest rates increased sharply in 3 sessions before Tet and then decreased again in 2 sessions after Tet in all terms. Closing on February 16, interbank VND interest rates were traded around: overnight 1.14% (-0.27 percentage points); 1 week 1.38% (-0.33 percentage points); 2 weeks 1.52% (-0.32 percentage points); 1 month 1.96% (+0.05 percentage points).
Interbank USD interest rates increased and decreased slightly in all terms. On February 16, the interbank USD interest rate closed at: overnight 5.19% (+0.02); 1 week 5.29% (+0.01 percentage point); 2 weeks 5.33% (+0.01 percentage point) and 1 month 5.40% (unchanged).
In the open market over 5 working days from February 5 to 16, in the mortgage channel, the State Bank bid for 7-day and 14-day terms, with a volume of VND5,000 billion, with interest rates at 4.0%. There was no winning volume, only VND2.28 billion matured. Thus, the State Bank withdrew a net VND2.28 billion from the market.
The State Bank of Vietnam continued not to offer State Bank bills for auction last week. There are no more bills circulating on the market.
Bond market: On February 7, the State Treasury successfully mobilized VND7,670 billion/VND8,000 billion of government bonds called for bid. The winning rate was 96%. Of which, the 5-year, 10-year and 15-year terms mobilized the entire amount of government bonds called for bid, respectively VND2,000 billion, VND3,000 billion and VND2,500 billion; the 20-year term mobilized VND170 billion/VND500 billion called for bid.
The winning interest rate for the 5-year term was 1.40% (+0.01 percentage point compared to the previous auction), 10-year 2.29% (+0.01 percentage point), 15-year 2.49% (+0.01 percentage point) and 20-year 2.65% (unchanged).
This week, on February 21, the State Treasury offered VND8,000 billion in government bonds, of which VND2,000 billion was offered for the 5-year term, VND3,000 billion for the 10-year term, VND2,500 billion for the 15-year term, and VND500 billion for the 30-year term.
The value of Outright and Repos transactions on the secondary market in the 5 working days from February 5-16 reached an average of VND 4,421 billion/session, a sharp decrease compared to VND 13,266 billion/session of the previous week.
Government bond yields in the 5 working days from February 5-16 fluctuated slightly down in the 3 sessions before Tet, then increased sharply again in the 2 sessions after Tet for most terms.
At the close of the session on February 16, government bond yields were trading around 1-year 1.17% (+0.05 percentage points); 2-year 1.20% (+0.05 percentage points); 3-year 1.23% (+0.04 percentage points); 5-year 1.43% (+0.01 percentage points); 7-year 1.82% (-0.01 percentage points); 10-year 2.31% (+0.01 percentage points); 15-year 2.53% (+0.01 percentage points); 30-year 3.0% (-0.04 percentage points).
The stock market in the 5 working days from February 5-16, the stock market had positive developments with increases on all 3 exchanges. At the end of the session on February 16, VN-Index stood at 1,209.70 points, up 37.15 points (+3.17%) compared to the previous weekend; HNX-Index increased 2.48 points (+1.08%) to 233.04 points; UPCom-Index increased 1.69 points (+1.91%) to 90.06 points.
Market liquidity was at an average level, although it increased significantly compared to the previous week, with trading value increasing to VND20,100 billion/session from VND18,600 billion/session the previous week. Foreign investors continued to net sell more than VND720 billion on all three exchanges.
International News
The United States recorded several notable economic indicators last week. First, the US Census Bureau announced that the headline CPI and core CPI in the country increased by 0.3% and 0.4% respectively compared to the previous month in January after increasing by 0.3% in the previous month, both larger than the forecasted increases of 0.2% and 0.3%.
Compared to the same period in 2023, the headline CPI increased by 3.1% in January, lower than the 3.4% recorded in the previous month but still higher than the forecast of 2.9%.
In addition, the US PPI (full-year) and core PPI (core) rose 0.3% and 0.5% m/m in January, respectively, after falling 0.1% in the previous month, stronger than the forecast of a slight increase of 0.1%. Compared to the same period in 2023, the full-year and core PPI increased 5.7% and 4.4%, respectively.
In the retail market, total retail sales and core retail sales in the US decreased by 0.8% and 0.6% respectively compared to the previous month after increasing by 0.4% in the previous month. Compared to the same period in 2024, total retail sales increased by 0.7%.
In the labor market, the number of initial jobless claims in the US in the week ending February 10 was 212 thousand, down from 220 thousand the previous week, and lower than the forecast of 219 thousand. The average number of claims in the most recent 4 weeks was 218.5 thousand, up 5.8 thousand compared to the average of the previous 4 consecutive weeks.
Next, US industrial production fell 0.1% month-on-month in January after being flat the previous month, against forecasts for a 0.2% increase.
Finally, the US consumer confidence index in February surveyed by the University of Michigan was at 79.6 points, up slightly from 79 points in January and almost matching the forecast of 80 points. This week, the market awaits the minutes of the first meeting of 2024 of the US Federal Reserve (Fed), announced early on February 22, Vietnam time.
The UK also received a lot of important economic news. The UK Office for National Statistics (ONS) announced that the country's GDP fell by 0.1% month-on-month in December 2023 after rising by 0.2% in the previous month, almost matching the forecast of a 0.2% decline. The UK's GDP in the fourth quarter of 2023 showed a 0.3% decline compared to the previous quarter after falling by 0.1% in the previous quarter, deeper than the forecast of a 0.1% decline.
The UK economy is now in a technical recession after contracting for two consecutive quarters, as the country's central bank keeps policy interest rates high to control inflation.
In terms of inflation, the headline CPI and core CPI in the UK increased by 4.0% and 5.1% year-on-year respectively in January, unchanged from the previous month's increase, lower than the forecast of 4.1% and 5.2%.
Bank of England (BoE) Governor Andrew Bailey said inflation pressures were showing signs of cooling more than the BoE had expected. However, he also affirmed that there was not yet enough reliable data for the BoE to change its stance on monetary policy at its next meeting.
Finally, in the retail market, total retail sales in the UK rose sharply by 3.4% month-on-month in January after falling by 3.3% in the previous month, higher than the expected increase of 1.5%. Compared to the same period in 2023, retail sales in the UK increased slightly by 0.7%, but were still around 1.3% lower than the pre-pandemic period in January 2020.
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