Dec. 21 (Bloomberg) -- Vietnam’s five-year bonds had the best week in a month on speculation inflation that’s almost half the average of the past two years will give the central bank more room to lower interest rates. The dong was steady.
The State Bank of Vietnam will reduce borrowing costs in the next few days, Thoi Bao Kinh Te Saigon reported Dec. 18, citing Prime Minister Nguyen Tan Dung. A Ministry of Planning and Investment report, which put monthly inflation in December below 0.5 percent and annual inflation in 2012 near 7 percent, provided sufficient support for a rate cut, the newspaper cited Dung as saying. Consumer prices rose 7.08 percent in November from a year earlier, compared with an average pace of 14.2 percent in the 24 months through Nov. 30, official data show.
“That’s a very strong signal for the market,” said Tran Kieu Hung, a Hanoi-based bond trader at Bank for Investment & Development of Vietnam.
The yield on five-year bonds fell eight basis points, or 0.08 percentage point, this week to 9.73 percent, according to a daily fixing rate from banks compiled by Bloomberg. That’s the lowest level since Aug. 23 and the largest weekly decline since the five-day period ending Nov. 23. The yield fell eight basis points today.
The dong traded at 20,855 per dollar as of 2:51 p.m. in Hanoi, compared with 20,848 a week earlier, according to data compiled by Bloomberg. It was little changed from yesterday. 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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