Vietnam’s Bonds Advance on Lending Rate-Cut Outlook; Dong Drops

Vietnam’s five-year bonds rose for a 19th day, the longest winning streak since July 2006, on speculation interest rates will be lowered. The dong weakened.

The State Bank of Vietnam was asked to “speed up” lending-rate cuts after inflation slowed, the government said on its website May 9. Consumer prices climbed 10.54 percent in April from a year earlier, the least since October 2010, official data show. The central bank lowered its refinancing, discount and repurchase rates by one percentage point each in April.

“Yields dropped because investors are expecting the central bank to cut interest rates by another one or two percentage points,” said Tran Thi Thanh Thao, a fixed-income analyst at Thang Long Securities Joint-Stock Co. in Hanoi.

The yield on five-year bonds fell eight basis points, or 0.08 percentage point, to 9.56 percent, according to a daily fixing from banks compiled by Bloomberg. That was the lowest level since August 2009.

The dong weakened 0.1 percent to 20,850 per dollar as of 4:05 p.m. in Hanoi, according to data compiled by Bloomberg. The central bank set the currency’s reference rate at 20,828, unchanged since Dec. 26, its website showed. The currency is allowed to trade as much as 1 percent on either side of the official fixing.

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