Vietnam’s Bonds Advance on Interest-Rate Outlook; Dong Stable

Vietnam’s five-year bonds advanced on speculation slowing inflation will increase room for policy makers to lower borrowing costs to spur growth. The dong was stable.

Interest rates may be reduced further if the pace of consumer-price gains slows, Nguyen Thi Hong, head of the central bank’s monetary-policy department, said in an article in online newspaper VnEconomy on Aug. 10. Inflation 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.

“Demand for government bonds returned in both primary and secondary markets in response to expectations that the central bank will again lower the deposit cap to give banks room to lower lending rates,” Nguyen Duy Phong, an analyst at Viet Capital Securities Co. in Ho Chi Minh City, wrote in a research note today.

The benchmark five-year yield slid one basis point, or 0.01 percentage point, to 9.61 percent, according to a daily fixing from banks compiled by Bloomberg.

The dong traded at 20,850 per dollar as of 5 p.m. in Hanoi, from 20,860 yesterday, 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