Consumer price inflation approaches 4.5% ceiling

DNVN - The "Asia Bond Monitor" report released by the Asian Development Bank (ADB) on June 26 stated that Vietnam's year-on-year consumer price inflation increased to 4.44% in May. This figure is close to the Government's ceiling of 4.5%.

Bond yields in emerging East Asia rose amid growing expectations that interest rates will remain high for longer, with bond outflows from the region totaling $20 billion in March and April, according to the ADB report.

Slower-than-expected deflation has reinforced the case for higher interest rates for longer, boosting bond yields in both advanced economies and regional markets. Regional currencies have depreciated against the US dollar and credit default swap spreads have widened in most markets.

Most stock markets in the region rallied on the back of a positive economic outlook, but ASEAN stocks saw outflows of $4.7 billion.

“Financial conditions in emerging East Asia remain stable, but persistent geopolitical tensions and adverse weather events pose higher risks to inflation, adding to uncertainty about the path of disinflation,” said Albert Park, ADB’s chief economist.

Vietnam's year-on-year consumer price inflation rose to 4.44% in May.

Some regional monetary authorities may maintain higher interest rates for longer to protect their currencies amid uncertainty about deflationary trends and global monetary stance.”

The East Asia region’s local currency bond market grew at a slower pace in the first quarter, growing 1.4 percent to $24.7 trillion, according to the ADB. A slowdown in government bond issuance in China and Hong Kong (China) has constrained the expansion of the regional market.

Higher interest rates for longer periods also weighed on the sustainable bond markets in the ASEAN, China, Japan and Korea (ASEAN+3) region, leading to a decline in sustainable bond issuance in the first quarter, reaching $805.9 billion at the end of March.

“ASEAN+3 remains the second largest sustainable bond market in the world, accounting for 18.9% of the global market share, behind the European Union (EU) at 37.6%. However, sustainable bonds account for only 2.1% of the total ASEAN+3 bond market, compared to 7.3% in the EU,” the report said.

Vietnam’s local currency bond market has recovered, growing 7.7% quarter-on-quarter, according to the ADB. The growth was driven by increased government bond issuance and the State Bank of Vietnam’s resumption of central bank bill issuance in March.

Treasury and other government bonds rose 3.3% QoQ to support government funding requirements. Corporate bonds fell 0.9% due to a large volume of maturing bonds and low issuance.

The sustainable bond market in Vietnam reached a size of 800 million USD by the end of March. This market includes green bonds and sustainable bond instruments issued by individual enterprises and mostly has short maturities.

“Government bond yields increased by an average of 56 basis points across all maturities as domestic inflation picked up and the US Federal Reserve delayed cutting its policy rate. Vietnam’s year-on-year consumer price inflation rose to 4.44% in May, approaching the government’s ceiling of 4.5%,” ADB said.

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Source: https://doanhnghiepvn.vn/kinh-te/lam-phat-gia-tieu-dung-tien-gan-den-muc-tran-4-5/20240626020603675