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Vietnam One-Year Bonds Rise on Rate-Cut Expectation; Dong Steady

Dec. 18 (Bloomberg) -- Vietnam’s one-year bonds rose, with the yield dropping by the most since July, on speculation banks stepped up purchases as they expect an interest-rate cut before the end of the year. The dong was little changed.

The State Bank of Vietnam said Dec. 10 that it wants to lower borrowing costs as macroeconomic conditions allow. The central bank has reduced its refinancing rate to 10 percent from 15 percent in 2012 to boost an economy it forecasts will grow 5.2 percent this year, the least since 1999. Inflation was 7.1 percent in November, compared with almost 20 percent a year earlier, official figures show. The government will release December consumer-price data before year-end.

“Banks still have capital to lend out and they believe interest rates will go down,” said Nguyen Duy Phong, a Ho Chi Minh City-based analyst at Viet Capital Securities Co.

The yield on the one-year bonds fell 10 basis points, or 0.10 percentage point, to 8.70 percent, according to a daily fixing rate from banks compiled by Bloomberg. That’s the steepest decline since July 30 and the lowest level since Aug. 20. The yield has fallen 4.04 percentage points this year.

The dong traded at 20,848 per dollar as of 3:30 p.m. in Hanoi, unchanged from 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.

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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