Bloomberg News

Vietnam Bonds Gain as Slower Inflation Spurs Banks’ Demand

October 06, 2011

Oct. 6 (Bloomberg) -- Vietnam’s government bonds advanced, pushing their yield to the lowest level since May, amid speculation banks are pouring more funds into the securities as inflation eases. The dong strengthened.

Consumer-prices increased 22.4 percent from a year earlier in September following a 23 percent jump in August that was the biggest since 2008, according to government data released Sept. 24. That was the first decline in the inflation rate since August 2010.

“Thanks to decelerating inflation, expectations about decreasing interest rates encouraged banks to purchase more government bonds,” Thang Long Securities Joint-Stock Co. said in a research note today.

The yield on the three-year government bond dropped one basis point, or 0.01 percentage point, to 12.29 percent, according to a daily fixing from banks compiled by Bloomberg.

The dong gained 0.1 percent to 20,828 per dollar as of 3:50 p.m. in Hanoi, according to data compiled by Bloomberg. The central bank fixed the reference rate at 20,648 per dollar today, according to its website. It adjusted the rate to 20,638 yesterday from 20,628, the first adjustment since Aug. 24. The currency is allowed to trade up to 1 percent on either side of the rate.

“The central bank and commercial banks will continue selling dollars to intervene in the market, fully meeting the economy’s necessary demand for foreign currency,” the State Bank of Vietnam said in a statement on its website late yesterday.

The monetary authority reiterated its determination to stabilize the exchange rate through year-end, saying the official fixing won’t be adjusted by more than 1 percent during that time.

--Diep Ngoc Pham. Editor: James Regan

To contact Bloomberg News staff for this story: Diep Ngoc Pham in Hanoi at dpham5@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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