Bloomberg News

Vietnam Bonds Rise as Central Bank Signals Rate Cut; Dong Steady

March 09, 2012

Vietnam’s five-year bonds rose after the central bank signaled it will cut interest rates. The dong was little changed.

The State Bank of Vietnam will reduce its refinancing and repurchase rates by 1 percentage point in the “next few days,” Governor Nguyen Van Binh said on March 6 in Hanoi, following a request from Prime Minister Nguyen Tan Dung. The central bank will also lower the maximum interest rate banks can pay for deposits in dong, he said. Consumer prices rose 16.44 percent in February from a year earlier, after increasing 17.27 percent in January, according to government data.

“Yields dropped because investors expect the central bank will cut interest rates as soon as Monday,” said Nguyen Duy Phong, Ho Chi Minh City-based analyst at Viet Capital Securities. “Also, investors continue to buy bonds amid enhanced system liquidity and a better economic outlook.”

The yield on five-year notes fell three basis points, or 0.03 percentage point, to 11.53 percent as of 3:57 p.m. in Hanoi, according to a daily fixing from banks compiled by Bloomberg. Yields also dropped three basis points this week.

The dong was little changed at 20,830 per dollar, according to data compiled by Bloomberg. The central bank set the reference rate at 20,828, unchanged since Dec. 26, its website showed. The currency is allowed to trade as much as 1 percent on either side of the official rate.

To contact Bloomberg News staff for this story: Nguyen Kieu Giang in Hanoi at giang1@bloomberg.net

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


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