Vietnam Yield Falls to 5-Year Low on Rate Outlook: Hanoi Mover

Vietnam’s bonds rose, driving the three-year yield to the lowest level in almost five years, on speculation the central bank will reduce interest rates as inflation slows. The dong was steady.

Some Vietnamese banks have cut local-currency deposit rates to as low as 7.5 percent, Tuoi Tre newspaper reported yesterday. The central bank in December lowered the cap on dong deposit rates to 8 percent from 9 percent. Consumer prices in Ho Chi Minh City dropped 0.29 percent this month from February, and declined 0.21 percent in Hanoi, online newswire CafeF reported March 20.

“Easing inflation will give room for the central bank to lower interest rates further, so investors are buying bonds in anticipation of rate cuts,” said Hoang Thanh Tam, head of the fixed-income department at Vietnam Maritime Commercial Joint- Stock Bank in Hanoi.

The three-year yield fell 13 basis points, or 0.13 percentage point, to 8.23 percent, the lowest since March 31, 2008, according to a daily fixing from lenders compiled by Bloomberg. The yield dropped 22 basis points this week, the most in two months.

The State Treasury sold 3 trillion dong ($143 million) of three-year notes to yield 8.18 percent, and 3 trillion dong of five-year securities at 8.84 percent yesterday, according to the Hanoi Stock Exchange website. Those rates compared with 8.45 percent and 9.2 percent, respectively, at last week’s auction.

Rate Cuts

The central bank cut interest rates six times last year, with the latest reduction taking effect Dec. 24. The refinancing and discount rates were each cut by 1 percentage point to 9 percent and 7 percent, respectively.

Vietnam’s inflation eased in February, with consumer prices climbing 7.02 percent from a year earlier after rising 7.07 percent in January, according to data from the General Statistics Office in Hanoi.

The dong traded at 20,943 per dollar as of 3:30 p.m. in Hanoi, unchanged from yesterday, data compiled by Bloomberg show. The currency was little changed from 20,950 at the end of last week.

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 as much as 1 percent on either side of the daily fixing.

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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