Yields declined on ample liquidity and reinvestment demand 

• In August, the Vietnam State Treasury (VST) issued VND29.7tn (USD1.3bn; +5.9% MoM) of G-bonds. As of the end of August, the VST had issued VND57.8tn (USD2.5bn) of G-bonds so far in Q3 and VND199tn (USD8.7bn) since the beginning of the year, fulfilling 48.1% of the Q3 plan and 56.9% of the full-year target. Meanwhile, we estimate that VND153tn (USD6.7bn) of G-bonds expired in 8M 2021, resulting in a net issuance of VND45.9tn (USD2.0bn) — down 55.3% YoY.
• Total trading turnover in the secondary market declined 11.1% MoM in August, but it grew 11.9% YoY in 8M 2021. 
• Bond yields declined across all tenors due to ample liquidity in the banking system. In the secondary market, 5Y and 15Y yields both recorded the sharpest fall of 18 bps MoM to quote at 0.91% and 2.3%, respectively, as of the end of the month, while 10Y yields fell 10 bps MoM to 2.11%.
• In August, foreign investors net bought VND769bn (USD33.4mn; +42.9% MoM), lifting net foreign inflows in 8M 2021 to VND10.9tn (USD473mn) vs only VND764bn (USD22.2mn) in the same period last year. 
• We estimate that the VST needs to issue an additional VND62.2tn (USD2.7bn) in September to complete its Q3 issuance target, which is more than double the amount issued in August. A possible increase in the bond supply should tend to raise bond yields. Nevertheless, we believe the system's abundant liquidity will help bond yields to remain low.

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