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Vietnam Two-Year Yield Drops by Most Since July After Auction

Nov. 7 (Bloomberg) --Vietnam’s bonds advanced, with the two-year yield dropping the most in three months, after borrowing costs fell at a government debt auction. The dong was steady.

The State Treasury sold 1 trillion dong ($48 million) of notes maturing 2014 yesterday with a coupon of 9.5 percent, according to the Hanoi Stock Exchange’s website. That compared with 9.7 percent at the last sale of like-maturity securities on Oct. 29. Banks have increased debt purchases as lending slows, said Nguyen Duy Phong an analyst at Viet Capital Securities.

“Lenders still have surplus cash and demand is high,” he said from Ho Chi Minh city. “That’s why yields have gone down.”

The yield on the two-year bonds fell seven basis points, or 0.07 percentage point, to 9.66 percent, according to a daily fixing rate from banks compiled by Bloomberg. That was the biggest drop since July 30 and the lowest level since Sept. 26. The yield on the five-year securities fell one basis point to 10.10 percent.

Outstanding loans increased 3.3 percent this year, Thoi Bao Kinh Te Vietnam newspaper reported yesterday, citing central bank data. In January, the government announced a 2012 credit-growth target of 15 percent to 17 percent.

The dong traded at 20,848 per dollar as of 3:36 p.m. in Hanoi, the same level as yesterday’s close, 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.

To contact the reporter on this story: Nick Heath in Hanoi at nheath2@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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