Corporate bond recovery set to continue amid funding maturity pressures

Corporate bond market recovery is anticipated to persist due to funding maturity pressures, according to data from the Vietnam Bond Market Association. In the first half of the year, private placements reached $7.5 billion, while public offerings amounted to $993.3 million. By the second half, $4.65 billion worth of bonds are expected to mature. Seven of the top 10 issuers were banks, while three were real estate firms, with Vinhomes leading the pack.

Bank issuances were driven by the need to raise funds, restructure maturities, and improve capital adequacy, according to Tran Thai Binh, a senior analysis director at OCBS Securities. This comes as credit growth remains high and system liquidity has faced pressure, with overnight interbank interest reaching 12.49 percent by the end of June.

Banks are issuing bonds to bolster Tier 2 capital, which serves as a safety net for absorbing losses. Coupon rates for these bonds hover around 8 percent, reflecting appropriate funding costs.

In real estate, issuance activity has also rebounded strongly, though it has been more selective, focusing on well-established companies with strong collateral and sales capabilities. Refinancing needs, cash-flow restructuring, and debt repayment preparations have been key drivers. Coupon rates for real estate bonds remain higher due to associated risks.

Binh predicts that the primary corporate bond market will continue recovering in the coming quarters, supported by banks' funding needs, real estate companies' refinancing requirements, and ongoing enhancements to the legal framework. However, coupon rates are unlikely to fall rapidly due to investor caution regarding credit risks, collateral, and repayment capacity.

Leading banks and companies are expected to raise funds at reasonable costs, while highly leveraged businesses or those with incomplete project legal procedures may face greater difficulties.

In real estate, issuance value is projected to improve as legal issues are resolved, refinancing needs increase, and supportive policies take effect. The government's goal of constructing at least one million social housing units by 2030 will create additional long-term funding demand for suitable companies. Nevertheless, the market is unlikely to return to the mass issuance era of the past, as companies with clean land banks, clear legal status, stable cash flows, and transparent collateral will have an easier time raising funds.