Bloomberg News

Vietnam Bonds Have Best Week Since 2009 on Interest-Rate Outlook

May 11, 2012

Vietnam’s five-year bonds had the best week since January 2009 after the government asked the central bank to lower borrowing costs. The dong was little changed.

The instruction posted on its website on May 9 cited slowing inflation as a reason to cut lending rates. Consumer prices climbed 10.54 percent in April from a year earlier, the least in 18 months, official data show. The central bank lowered the refinancing rate, the discount rate and the repurchase rate by 1 percentage point each, effective April 11, the second reduction in less than a month.

“We may not have to wait until the third quarter of 2012 to see a drop in interest rates,” which could happen this quarter due to abundant liquidity and slowing inflation,” Cao Tan Phat, Ho Chi Minh City-based analyst at ACB Securities Co., wrote in a research note today. The inflation rate may decline to “single-digits in May,” he said.

The yield on five-year bonds fell 61 basis points, or 0.61 percentage point, this week to 9.63 percent, the lowest level since August 2009, according to a daily fixing from banks compiled by Bloomberg. It dropped four basis points today.

Vietnam’s refinancing rate is currently 13 percent, while the discount and repurchase rates stand at 11 percent and 12 percent, respectively.

The dong traded at 20,850 per dollar as of 3:20 p.m. in Hanoi, compared with 20,853 a week ago, according to data compiled by Bloomberg. The central bank set the currency’s 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 fixing.

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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