Vietnamese Bonds Decline on Inflation Concern; Dong Advances

Vietnam’s five-year bonds declined for a second day on speculation inflation will accelerate and interest rates will be increased. The dong gained.

It will be “very difficult” to slow inflation to 17 percent by the end of this year, Ha Van Hien, head of the National Assembly’s Committee for Economic Affairs, told the legislative body today in Hanoi. The government is forecasting annual inflation of 15 percent to 17 percent, according to a statement posted on its website last month. Consumer prices jumped 20.8 percent in June from a year earlier, the fastest pace since November 2008, official data showed June 24.

“Bonds yields gained as investors are concerned the government will further tighten monetary policy and interest rates will rise again,” said Vu Anh Duc, a Hanoi-based senior fixed-income dealer at Vietnam Joint Stock Commercial Bank for Industry and Trade.

The yield on five-year bonds rose two basis points, or 0.02 percentage point, to 12.47 percent, according to a daily fixing from banks compiled by Bloomberg. The dong gained 0.4 percent to 20,532 per dollar as of 1:51 p.m. in Hanoi, according to prices from banks compiled by Bloomberg. That was the biggest daily increase in a month.

The central bank set the reference rate at 20,608 today, unchanged from yesterday. The currency is allowed to trade up to 1 percent on either side of the official rate.

--Nguyen Kieu Giang in Hanoi. Editors: Andrew Janes, Anil Varma

To contact the Bloomberg News Staff on this story: Nguyen Kieu Giang in Hanoi at giang1@bloomberg.net

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