Vietnam’s five-year bonds fell for a third day on concern higher fuel costs will spur inflation, reducing room for the central bank to cut interest rates. The dong strengthened.
Vietnam raised local prices of petroleum products by as much as 12 percent on March 7. Consumer prices increased 14.15 percent this month from a year earlier, the smallest gain in a year, government data showed on March 24. Slowing inflation may allow the nation to cut borrowing costs by 100 basis points per quarter, central bank Governor Nguyen Van Binh said March 12.
“We’ve seen demand for government fixed-income assets waver in both primary and secondary markets as investors are concerned of a spike in inflation,” Marc Djandji, head of research in Ho Chi Minh City at Viet Capital Securities, wrote in a research report today.
The yield on benchmark five-year notes rose two basis points, or 0.02 percentage point, to 11.51 percent, according to a daily fixing from banks compiled by Bloomberg. That’s the highest level since March 21.
The dong advanced 0.6 percent to 20,725 per dollar as of 3:42 p.m. in Hanoi, according to data compiled by Bloomberg. The State Bank of Vietnam set its reference rate at 20,828, unchanged since Dec. 26, according to its website. The currency is allowed to fluctuate by as much as 1 percent on either side of that rate.
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