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Vietnam 2-Year Bonds Have Best Week Since August on Bank Demand

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Jan. 11 (Bloomberg) -- Vietnam’s two-year bonds rallied, causing the biggest weekly drop in yields since August, on speculation a slowdown in lending spurred banks to invest their surplus cash in debt. The dong was unchanged.

The value of outstanding loans increased 8.9 percent in 2012, while funds in the banking system rose 22 percent from a year earlier, the State Bank of Vietnam reported in its operations review yesterday. Lending climbed 14 percent in 2011, government data published in May showed.

“Liquidity in the market is good and demand is coming from the banks,” said Pham Phuong Lan, the Hanoi-based head of fixed income and currency trading at Bank for Investment & Development of Vietnam.

The yield on the notes fell 19 basis points, or 0.19 percentage point, to 8.78 percent, according to a daily fixing from banks compiled by Bloomberg. That was the largest five-day decline since the period ended Aug. 3. The rate rose three basis points today.

The dong traded at 20,840 per dollar as of 2:34 p.m. in Hanoi, the same level as yesterday and little changed from a week ago, according to data compiled by Bloomberg.

The State Bank of Vietnam set its dong reference rate at 20,828, unchanged since December 2011, according to its website. The currency is allowed to trade as much as 1 percent on either side of the fixing.

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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