Vietnam’s five-year bonds fell, driving the yield to the highest level since May, on concern demand for existing securities will weaken as a budget deficit spurs the government to borrow more. The dong strengthened.
The notes dropped for a second day after yields rose at a sovereign debt auction yesterday. The State Treasury sold a total 1.6 trillion dong ($77 million) of two- and three-year bonds at 9.8 percent and 10 percent, respectively, according to the Hanoi Stock Exchange. It issued similar-maturity bonds at 9.7 percent and 9.9 percent on Oct. 5. State spending jumped 14.5 percent to 643.2 trillion dong in the first nine months of 2012, exceeding revenue by 29 percent, according to a finance ministry statement yesterday.
“The budget deficit is putting pressure on government bond issuance,” said Tran Thi Thanh Thao, a Hanoi-based analyst at MB Securities Joint-Stock Co. “The finance ministry needs to push up yields to attract investors.”
The yield on the five-year securities climbed eight basis points, or 0.08 percentage point, to 10.32 percent, the highest since May 3, according to a daily fixing from banks compiled by Bloomberg. It rose 17 basis points since Oct. 5, the most since the five days ended Aug. 24, in an eighth weekly increase.
The dong rose 0.1 percent to 20,845 per dollar as of 2:20 p.m. in Hanoi, extending this week’s gain to 0.2 percent, according to data compiled by Bloomberg. The central bank fixed the reference rate at 20,828, a level unchanged since Dec. 26, according to its website. The currency is allowed to trade as much as 1 percent on either side of the rate.