Vietnamese Bonds Advance on Interest-Rate Outlook; Dong Steady

Vietnam’s government bonds advanced, pushing the benchmark five-year yield to the lowest level in almost two months, on speculation interest rates will be cut should inflation slow further. The dong was steady.

Consumer-price gains eased to a 32-month low of 5.35 percent in July, government data show. The central bank has cut its key refinance rate five times this year to 10 percent from 15 percent. Borrowing costs may be reduced further if inflation slows, Nguyen Thi Hong, head of the central bank’s monetary- policy department, said in an article in online newspaper VnEconomy published late on Aug. 10.

“Investors have increased bond holdings because it’s still a relatively safe and profitable investment channel, given the current downtrend of interest rates,” said Do Hoang Quynh Trang, a fixed-income trader at Ocean Commercial Joint-Stock Bank in Hanoi.

The benchmark five-year yield fell four basis points, or 0.04 percentage point, to 9.61 percent, the lowest level since June 15, according to a daily fixing from banks compiled by Bloomberg.

The dong traded at 20,853 per dollar as of 4:29 p.m. in Hanoi, the same as at the end of last week, according to data compiled by Bloomberg. The central bank set its reference rate at 20,828, unchanged since Dec. 26, according to its website. The currency is allowed to trade as much as 1 percent on either side of the fixing.

To contact Bloomberg News staff for this story: Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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