Vietnam Bonds Gain for Seventh Week on Rate Outlook; Dong Rises

Vietnam’s five-year government bonds gained for a seventh week on speculation interest rates will be cut. The dong advanced.

The State Bank of Vietnam instructed lenders to “reduce interest rates to levels that are suitable to the macroeconomic situation,” according to a statement posted on its website on Feb. 13. Inflation (VNCPIYOY) cooled for a fifth month in January, with consumer prices rising 17.3 percent from a year earlier, according to official data.

“The expectation is that the central bank will lower the interest rate in the future,” said Nguyen Duy Phong, a Ho Chi Minh City-based analyst at Viet Capital Securities. “In conjunction with inflation slowdown, investors are heavily investing in bonds.”

The yields on five-year notes fell 14 basis points, or 0.14 percentage point, this week to 12.23 percent, according to a daily fixing from banks compiled by Bloomberg. The rate dropped two basis points today.

The dong strengthened 0.2 percent this week to 20,833 per dollar as of 3:54 p.m. in Hanoi, according to data compiled by Bloomberg. The currency was little changed today. The central bank set the reference rate at 20,828, its website showed. The dong is allowed to trade as much as 1 percent on either side of the official rate.

To contact Bloomberg News staff for 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