Investors Flock to Vietnam's 10-Year Bonds Amid Global Sell-Off

As major global bond markets face a sell-off, Vietnam is witnessing a surge in investment in its 10-year bonds. Despite rising bond yields, demand remains strong due to attractive returns, and the low foreign ownership percentage limits the direct impact of global capital outflows.

According to the Hanoi Stock Exchange (HNX) and local reports, Vietnam's treasury conducted a bond auction last week, raising over 27 trillion dong (approximately $1.72 billion) from a total offering of 33 trillion dong. This marks the largest auction result on record, according to statistics from Vietnam's credit rating agency S&I Ratings.

Investor interest has particularly concentrated on the 10-year bonds. Orders exceeded the initial issuance target of 20 trillion dong, prompting the treasury to issue an additional 2 trillion dong on the same day. In contrast, the auction results for 3-year and 30-year bonds were relatively modest, indicating a strong preference for the 10-year bonds, which are considered the benchmark in Vietnam's bond market.

The rise in bond yields is a key factor behind this interest. Recent issuance rates for 5-year and 10-year bonds have reached levels between 4.1% and 4.3%, up from around 4% at the beginning of the year.

A representative from Yuanta Securities Vietnam (YSVN) stated, "The recent increase in bond yields has made them attractive for investment, which is a major reason for the improved auction results. Additionally, the liquidity in the banking sector has improved since late August and early September, allowing banks to increase their bond investment ratios."

Vietnam's bond market is showing a different trend compared to major developed countries. In nations like Japan, the UK, Germany, and the US, rising fiscal burdens and inflation concerns have led to increased bond selling and higher interest rates.

While Vietnam's long-term bond yields are also on the rise, local experts note that the factors driving this increase differ. A representative from Dragon Capital's bond division explained, "In Vietnam, high credit growth rates, currency fluctuations, increased bond issuance, and liquidity in the interbank market are key variables, whereas in the US and Japan, fiscal policy and inflation have a relatively larger impact."

Notably, Vietnam's bond market has a very low proportion of foreign investment. As of the end of last year, domestic banks held about 37.1% of government bonds, while Vietnam's social insurance and insurance companies accounted for 61.6%. In contrast, foreign investors held only about 0.1% to 0.15% of the market.

This is significantly lower than other Southeast Asian countries, such as the Philippines (5%), Thailand (9.3%), Indonesia (12.8%), and Malaysia (34.2%). This structure suggests that the direct impact of foreign capital withdrawal may be relatively limited.

However, Vietnam's bonds are not completely insulated from the global financial market. They can be indirectly affected by US bond yields, the dollar-dong exchange rate, domestic liquidity conditions, and global interest rate changes.

The Vietnamese government is expected to expand bond issuance as it embarks on large-scale public investment projects. The treasury aims to raise 500 trillion dong through bond issuance this year, but the current achievement rate is just over 53%. The government needs to meet its annual funding target while securing long-term funds for public investment.

Indeed, the scale of bond auctions is increasing. Previously, weekly auction amounts ranged from 12 trillion to 15 trillion dong, but in the last three weeks, they have exceeded 20 trillion dong. This week, an auction of 18 trillion dong is scheduled, with 11 trillion dong allocated for 10-year bonds.

The 10-year bonds are appealing to both the government and investors. From the government's perspective, they can raise a significant amount of funds at once while extending the repayment period. For investors, these bonds offer recently increased yields while reducing maturity burdens compared to 15-year, 20-year, or 30-year bonds.

Vietnam's demand for medium- to long-term funds is substantial. To support the expansion of public investment from 2026 to 2030, the importance of raising funds through capital markets, including bonds, is expected to grow. A representative from Yuanta Securities Vietnam noted, "Some of the long-term funding needs must shift to capital markets, where bonds will play a crucial role."

However, attracting foreign investors remains a challenge. Vietnamese bonds are not included in major emerging market bond indices, and the country's credit rating has not yet reached investment-grade status. S&P Global Ratings and Fitch assign Vietnam a BB+ rating, while Moody's rates it Ba2.

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