Vietnam’s Bonds Drop as Inflation Outlook Damps Rate-Cut Chance

Vietnam’s government bonds fell, pushing the three-year yield to the highest level in almost two months, on speculation inflation will quicken and leave less room for an interest-rate cut. The dong weakened.

Consumer prices will rise 1.5 percent in September from August, Ho Chi Minh City Securities Corp. forecast in a report released yesterday. Prices rose 0.63 percent last month from July, according to official data. The central bank has cut its key refinance rate five times this year to 10 percent from 15 percent to spur economic growth.

Rising prices make it “harder to impose another interest- rate cut over the coming months and therefore limits monetary- policy options,” analyst Christopher Blank at Ho Chi Minh City Securities in the Vietnamese financial hub wrote in the report.

The yield on the three-year notes rose two basis points, or 0.02 percentage point, to 9.76 percent, the highest level since July 24, according to a daily fixing from banks compiled by Bloomberg.

The dong fell 0.1 percent to 20,875 per dollar as of 3:22 p.m. in Hanoi, according to data compiled by Bloomberg. The State Bank of Vietnam set the currency’s reference rate at 20,828, unchanged since Dec. 26, according to its website. The dong is allowed to trade as much as 1 percent on either side of the rate.

To contact Bloomberg News staff for this story: Diep Ngoc Pham in Hanoi at dpham5@bloomberg.net

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

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