Vietnam Bonds Gain as Banks Buy Instead of Lending; Dong Steady

Vietnam’s five-year bonds advanced, pushing the yield to a two-week low, on speculation banks bought debt amid a slowdown in lending. The dong was steady.

The amount of outstanding loans increased 2 percent this year through September, Dau Tu newspaper reported yesterday citing Tran Van Tan, head of the credit division at the central bank’s credit department. Lending rose 14.4 percent last year, the government said in May. Non-performing loans may have accounted for as much as 8.8 percent of outstanding credit at the end of June, Nguyen Van Giau, head of the National Assembly’s Economic Committee, said Oct. 22.

“Banks cannot lend easily right now,” said Nguyen Tan Thang, fixed-income investment director at Ho Chi Minh City Securities Joint-Stock Co. “There’s no demand and they are still risk averse. They are more interested in bonds.”

The yield on the benchmark five-year bonds fell seven basis points, or 0.07 percentage point, to 10.23 percent, the lowest level since Oct. 10, according to a daily fixing rate from banks compiled by Bloomberg.

Vietnam’s economy needs to expand by 6.5 percent in the fourth quarter to meet a 2012 growth target of 5.2 percent, Prime Minister Nguyen Tan Dung said Oct. 22. That would be the slowest full-year growth since 1999. The economy expanded 4.7 percent in the first nine months of 2012, official data show.

The dong traded at 20,850 per dollar as of 3:05 p.m. in Hanoi, compared with 20,851 yesterday, 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 as much as 1 percent on either side of the rate.

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