Vietnam One-Year Bonds Drop as Banks Cut Holdings to Raise Cash

Vietnam’s one-year bonds fell the most in seven months on speculation banks pared holdings to raise cash to meet withdrawals before the Lunar New Year holiday. The dong was steady.

The State Treasury sold 2.29 trillion dong ($109 million) of 364-day bills at an average 7.90 percent yesterday, according to the Hanoi Stock Exchange website, compared with 7.65 percent on Jan. 21. The yield rose as banks preferred holding cash, paring demand for the notes, said Pham Tri Hieu, a fixed-income trader at Military Commercial Joint-Stock Bank (MBB) in Hanoi. Vietnam will celebrate the week-long Lunar New Year holiday, known as Tet, starting Feb. 9.

“In two weeks we have the Tet holiday, so banks have to reserve more money to prepare,” Hieu said.

The yield on one-year bonds rose 19 basis points, or 0.19 percentage point, to 8.05 percent, according to a daily fixing rate from banks compiled by Bloomberg. That’s the biggest increase since June 25. The yield on benchmark five-year bonds was unchanged at 9.05 percent.

The dong traded at 20,848 per dollar as of 2:55 p.m. in Hanoi, compared with 20,843 yesterday, according to data compiled by Bloomberg. The State Bank of Vietnam set its reference rate at 20,828, unchanged since December 2011, according to its website. The currency is allowed to trade up to 1 percent on either side of the rate.

To contact Bloomberg News staff for this story: Nick Heath in Hanoi at nheath2@bloomberg.net

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

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