The average issuance yield of bonds from real estate companies has dropped from 12% in April 2024 to just over 10%. In contrast, banks have increased their bond issuance yields, driven by the growing need for capital.
High Demand for Capital Leads to Rising Bank Bond Yields
According to a recent bond market report by VPBank Securities, the average bond issuance yield of real estate companies has decreased from a peak of 12% in April 2024 to 10.95% by June. By July 2024, the market even recorded a 0% interest rate bond issuance by Da Nang Information Technology Park Development JSC, with a total value of 500 billion VND and a term of 30 months. The remaining issuances in the market fluctuated between 9.8% and 12%.
Based on VPBank’s estimates, the average yield is expected to remain around 10% in July. Moving into August, the bond yields of real estate companies continued to hover at similar levels.
Contrary to the declining trend in real estate bond yields, VPBank noted a slight increase in yields among financial institutions, rising from an average of 5.7% to 6%. Additionally, the yields of bonds issued by securities trading and commercial service companies also saw an increase.
Explaining this trend, Mr. Duong Thien Chi, a VPBank Securities analyst, stated that the bond issuance yields of the real estate sector have been decreasing due to expectations that the challenges faced by the bond market in general and the real estate sector in particular will be resolved.
“On the other hand, the bond yields of financial institutions are expected to continue a slight upward trend in the coming period, due to the need for medium- and long-term capital as credit recovers,” Mr. Chi noted.
Data also shows that bond issuance volume recovered significantly in August, surpassing the levels of the first five months of the year. However, most of the issuances were from financial institutions.
Banks Dominate the Bond Issuance Race
According to financial statements, as of the end of the second quarter, deposit balances at most banks grew at a lower rate compared to the same period last year due to the persistently low deposit interest rates.
Several banks even experienced a decline in deposit balances compared to the beginning of the year, such as Vietcombank (-1.8%), PVcomBank (-1.44%), VietABank (-0.34%), TPBank (-2.5%), and ABBank (-14.52%).
Analysts attribute the low deposit growth to the tendency of individuals to withdraw money and shift to other investment channels.
Market Dynamics
Not only in the primary market but in August 2024, bonds issued by banks and real estate companies also accounted for over 90% of the trading volume in the secondary market, with the majority of transactions involving maturities of 1 to 3 years.
In conclusion, the bond market dynamics show a divergent trend where bank bond yields are rising due to increased demand for capital, while real estate companies are experiencing declining yields as they grapple with ongoing challenges in the market.