Vietnam’s Five-Year Bonds Rise as Inflation Slows; Dong Weakens

Vietnam’s benchmark five-year bonds rose for the first time in seven days on speculation the central bank will cut interest rates after inflation slowed to the least since August 2010. The dong weakened.

Consumer prices climbed 8.34 percent in May from a year earlier, the General Statistics Office said in Hanoi today. The median estimate in a Bloomberg News survey of seven economists was for an 8.9 percent increase. Prime Minister Nguyen Tan Dung told the central bank to “speed up” reductions in borrowing costs, the government said on May 9. State Bank of Vietnam Governor Nguyen Van Binh said in March the monetary authority would lower rates by 100 basis points in each of the second, third and fourth quarters.

“SBV is likely to respond to the sharper-than-expected decline in inflation by cutting rates in the coming two weeks,” Trinh D. Nguyen, a Hong Kong-based economist for HSBC Holdings Plc, said in an e-mail.

Five-year bond yields fell one basis point, or 0.01 percentage point, to 9.68 percent, according to a daily fixing from banks compiled by Bloomberg.

The dong declined 0.1 percent to 20,868 per dollar as of 3:16 p.m. in Hanoi, according to data compiled by Bloomberg. The State Bank of Vietnam set its reference rate at 20,828, unchanged since Dec. 26, according to its website. The currency is allowed to trade up to 1 percent on either side of the rate.

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