Vietnam’s Bonds Gain as Bank Cash Supply Improves; Dong Falls

Vietnam’s government bonds advanced on speculation an improved cash supply at lenders will boost demand for the securities. The dong fell.

The central bank on Sept. 19 extended the term at which it lends to commercial banks via open-market operations to 14 days from seven days for the first time since January. The State Treasury will offer 1 trillion dong ($48 million) each of five- year and three-year notes tomorrow, according to the Hanoi Stock Exchange.

“The extended term in the open-market operations allows money to be circulated for a longer period, so interest rates may decline, which in turn will help bring down bond yields,” said Pham Minh Hoang, a fixed-income dealer at Ocean Commercial Joint-Stock Bank in Hanoi. “Banks are interested in buying government debt this year because they expect yields to drop further in 2012.”

The yield on the five-year government bond dropped two basis points, or 0.02 percentage point, to 12.46 percent, according to a daily fixing from banks compiled by Bloomberg.

The dong dropped 0.1 percent to 20,827 per dollar as of 4:19 p.m. in Hanoi, according to data compiled by Bloomberg. The central bank fixed the reference rate at 20,628, unchanged since Aug. 24, according to its website. The currency is allowed to trade up to 1 percent on either side of the rate.

The treasury sold 360 billion dong of three-year securities at 12.14 percent on Sept. 15. That is more than the 50 billion dong of similar-maturity notes it sold at 12.15 percent the week before. The overnight interbank deposit rate fell four basis points, or 0.04 percentage point, to 12.25 percent.

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