The Impacts of Fiscal and Macroeconomic Factors on Vietnam Government Bond Yield

Abstract

Government bond yield refers to the borrowing cost for government and the expected return for the individual and institutional investors. Having knowledge of government bond yield helps government operate or adjust the government bond issuance to boost the economic conditions in a country and support investors when diversifying their investment portfolio. To contribute to government bond’s literature and government’s policy, the determinants of government bond yield in Vietnam are examined by using GARCH-types models for time-series data. The findings show that for the 3-year and 5-year government bonds, there are positive relationships between the percentage change of Central Government Balance, Policy Rate change and government bond yields change; while the percentage change of Exchange Rate and VN Index negatively affect government bond yields change. For 10-year government bond, Policy Rate, VN Index, Inflation and VIX are the most significant determinants of the government bond yields. Their changes positively affect bond yields change while Inflation has a negative relationship with government bond yields change. Moreover, Inflation has more significant impact on the change in long-term government bond yields than that in shorter-term government bond yields.

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“…In addition, it is necessary for investors to engage in the practise of predicting long-term interest rates and valuing corporate securities and other financial instruments (Nguyen and Nguyen, 2020) [18] . Bonds, which are considered as extended financial instruments, provide a contractual obligation for the borrower to fulfil the bondholders' requirements for both interest and principal repayments within a predetermined future timeframe (Nguyen and Nguyen, 2022) [17] . Security market growth might ease monetary policy implementation.…”