Vietnam’s bonds rose, pushing the five-year yield to a three-month low, on speculation a slowdown in lending growth resulted in banks investing surplus funds in government debt. The dong was steady.

Outstanding loans increased 4.2 percent this year through Nov. 20, compared with 14.4 percent in 2011, official data show. Liquidity at banks is improving, central bank Deputy Governor Dang Thanh Binh, told a conference in Hanoi today, adding that Vietnam will manage credit growth in line with consumer-price gains. Inflation will be about 7 percent this year, Prime Minister Nguyen Tan Dung said Nov. 28.

“Demand from banks is still strong and they believe they can get some short-term profit,” said Nguyen Duy Phong, a Ho Chi Minh City-based analyst at Viet Capital Securities. “They expect yields to continue to go down.”

The yield on the benchmark five-year bonds fell three basis points, or 0.03 percentage point, to 9.80 percent, according to a daily fixing rate from banks compiled by Bloomberg. That’s the biggest decline in more than a week and the lowest yield since Aug. 29.

The dong was unchanged at 20,850 per dollar as of 2:28 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 trade as much as 1 percent on either side of the daily fixing.

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