Bloomberg News

Vietnam’s Five-Year Bonds Fall on Inflation Concern; Dong Steady

September 05, 2012

Vietnam’s five-year bonds fell, pushing the yield to the highest level in almost six weeks, on speculation inflation will accelerate, reducing room for policy makers to cut interest rates. The dong was steady.

State Bank of Vietnam Governor Nguyen Van Binh said on Aug. 21 the central bank will be “very cautious” in lowering borrowing costs further, following a 5 percentage point reduction in its refinance rate this year. Consumer-price gains may quicken to between 6 percent and 7 percent by year-end, analysts at Australia & New Zealand Banking Group Ltd. (ANZ) wrote in an Aug. 24 note, from 5.04 percent in August.

“Investors are concerned that inflation may rise toward the year-end and want to wait for better bond prices,” said Tran Kieu Hung, a Hanoi-based debt trader at Bank for Investment & Development of Vietnam.

The yield on benchmark five-year bonds rose one basis point, or 0.01 percentage point, to 9.84 percent, according to a daily fixing rate from banks compiled by Bloomberg. That’s the highest level since July 27.

The dong traded at 20,855 per dollar as of 3:52 p.m. in Hanoi, compared with 20,861 yesterday, 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 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: James Regan at jregan19@bloomberg.net


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