Vietnam 2-Year Bonds Rally as Growth Slows; Dong Little Changed

Vietnam’s two-year government bonds rose the most in a month after the economy expanded at its slowest pace since 2009, fueling speculation the central bank will cut interest rates. The dong was little changed.

Gross domestic product increased 4 percent in the three months through March from a year earlier, the General Statistics Office said yesterday. Slowing inflation may allow the nation to lower borrowing costs by 100 basis points per quarter, central bank Governor Nguyen Van Binh said March 12. Consumer prices climbed 14.15 percent this month from a year earlier, the smallest gain in a year, government data showed March 24.

“Inflation is coming down and growth was a huge disappointment,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB. “The central bank will continue the rate-cutting cycle.”

The yield on two-year notes fell 14 basis points, or 0.14 percentage point, to 11.49 percent, the biggest drop since Feb. 29, according to daily fixings from banks compiled by Bloomberg. The rate dropped 103 basis points this quarter.

The dong traded at 20,833 per dollar as of 2:45 p.m. in Hanoi, compared with 20,825 yesterday, according to data compiled by Bloomberg. The currency has gained 1 percent since the end of last year.

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 fluctuate by as much as 1 percent on either side of that rate.

To contact the reporter on this story: Nick Heath in Hanoi at nheath2@bloomberg.net

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

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