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Vietnam’s Bonds Rise on Interest-Rate Outlook; Dong Declines

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Dec. 14 (Bloomberg) -- Vietnam’s government bonds rose, with five-year yields dropping to the lowest in two weeks, on speculation the central bank will cut borrowing costs. The dong dropped.

The State Bank of Vietnam will reduce the interest-rate cap on dong deposits at commercial lenders next year, online newswire VnExpress reported, citing an unidentified banker who attended a meeting between banks and the monetary authority last week. The State Bank said at the meeting that it will leave the ceiling unchanged at 14 percent through December, according to VnExpress.

“People in the market expect the average level of interest rates to drop early next year, so they probably priced that to their bond yields,” said Nguyen Thi Ngoc Anh, the Ho Chi Minh City-based head of fixed-income trading at Asia Commercial Bank.

The yield on benchmark five-year notes declined four basis points, or 0.04 percentage point, to 12.44 percent, according to a daily fixing from banks compiled by Bloomberg. That was the lowest rate since Nov. 29.

The dong fell 0.1 percent to 21,025 per dollar as of 4:30 p.m. in Hanoi, according to prices from banks compiled by Bloomberg.

The State Bank of Vietnam lowered its reference rate to 20,813 from 20,803 yesterday, according to its website. It was the first time since Oct. 28 that the central bank changed the daily rate. The currency is allowed to fluctuate by as much as 1 percent on either side of that rate.

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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