To develop the bond market

(Baonghean) - The development of a system of government bond bidding members - a premise for developing a system of market makers - is bringing positive results to the current Vietnamese government bond market.

Government bonds.

In the past time, the results of the pilot implementation of the market maker system in the primary market of Government bonds in Vietnam showed that since 2012, according to the provisions of Decree No. 01/2011/ND-CP of the Government and Circular No. 17/2012/TT-BTC of the Ministry of Finance, a system of Government bond bidding members has been formed with basic rights and obligations such as minimum purchase volume, commitment to list bid and offer prices, etc. Because currently there is no mechanism to support liquidity in the secondary market, there is no obligation for two-way mandatory bidding for bidding members.

Government bonds used for infrastructure investment. Illustration photo

After 2 years of implementation, Vietnam's bidding member system currently consists of 24 members, mainly commercial banks with 18/24 members. The establishment of the Government bond bidding member system has contributed to bringing good results for capital mobilization.

Thus, the development of the system of members bidding for government bonds - the premise for developing the system of market makers - is bringing positive results to the current Vietnamese government bond market. However, in order to meet the requirements of developing the market in a broad and sustainable manner, the formation of a system of market makers with full rights and obligations is very necessary; in which the issue of enhancing the responsibility of the system of market makers in both the primary and secondary markets; studying and promulgating a liquidity support mechanism to move towards the requirement of market making obligations of this system in the secondary market through two-way bidding and firm commitment are core issues.

Based on the current development status of the Vietnamese government bond market and the characteristics of the investor structure in the market, the State Treasury has proposed a number of solutions to develop this system in the coming time. Accordingly, it is necessary to develop the market in a sustainable manner according to international practices, creating favorable conditions for entities participating in market activities; synchronously implementing solutions according to the roadmap for bond market development until 2020 stipulated in Decision No. 261/QD-BTC of the Minister of Finance.

Second, promulgate a legal framework on the rights and obligations of market makers, thereby enhancing the responsibility of bidding members in the primary market, especially commercial banks.

Third, continue to study and promulgate policies and mechanisms on liquidity support mechanisms in the market to move towards additional regulations on obligations for market makers in the secondary market to offer two-way committed prices.

Fourth, it is necessary to speed up the process of registration, depository, listing, repo operations, and providing price information to support the participation of market makers in the secondary market.

The Ministry of Finance said it will continue to build and develop the bond market in a sustainable, highly liquid manner, and gradually approach international practices and standards to become an important, safe, and effective capital mobilization channel for the economy with the specific goal of total outstanding debt of the bond market reaching 38% of GDP in 2020. Regarding corporate bonds, the Ministry of Finance will evaluate the implementation of Decree No. 90/2011/ND-CP on corporate bond issuance.

For government bonds, we will continue to study and issue new products to diversify products on the market. We will continue to study the liquidity support mechanism to establish a market maker system from the government bond bidding member system. We will continue to study and submit to the Government for promulgation of the Decree on Voluntary Pension Fund to promote long-term investment demand in the bond market. We will coordinate with the State Bank in operating the fiscal and monetary markets, ensuring that bond issuance interest rates and monetary interest rates are stable and have few major fluctuations.

To develop the investor system, the Ministry of Finance will encourage the development of a long-term investor system in the market such as pension funds, insurance companies, etc. to gradually reduce dependence on the commercial banking system. Continue to build a roadmap to attract foreign investors with fundamental solutions such as stabilizing the macro economy; building and developing derivative bond products such as contracts, terms, etc. to prevent risks in the bond market; increase transparency in the market by building a specialized electronic information page for the bond market with full market information data.

Red River