Bloomberg News

Vietnam Bonds Advance as Inflation May Slow; Dong Strengthens

April 16, 2012

Vietnam’s five-year bonds rose on speculation inflation will ease this month, allowing the central bank to continue cutting interest rates. The dong snapped a five-day decline.

Slowing consumer-price gains may give policy makers room to lower borrowing costs by 100 basis points in the second, third and fourth quarters, central bank Governor Nguyen Van Binh said last month. The monetary authority cut its repurchase rate to 12 percent from 13 percent on April 11, the second reduction in a less than a month, and trimmed its refinancing and discount rates by a percentage point each. Inflation slowed to a one-year low of 14.15 percent in March, government data show.

“The market expects the consumer price index to be lower this month,” said Nguyen Duy Phong, a Ho Chi Minh City-based analyst at Viet Capital Securities. “That’s why yields are coming down.”

The yield on the government’s five-year notes declined one basis point, or 0.01 percentage point, to 11.21 percent according to a daily fixing rate from banks compiled by Bloomberg. The rate has dropped 27 basis points this month.

The dong advanced 0.4 percent to 20,843 per dollar as of 3:24 p.m. in Hanoi, according to data compiled by Bloomberg. That was the biggest gain since April 4. The central bank set the reference rate at 20,828, unchanged since Dec. 26, according to its website. The currency is allowed to trade up to 1 percent on either side of the rate.

To contact the reporter on this story: Nick Heath in Hanoi at nheath2@bloomberg.net

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


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