Vietnam’s government bonds rallied, with the two-year yield falling by the most since July, after the government sold debt at lower interest rates. The dong was little changed.
The yield dropped to its lowest level since February 2009 after the State Treasury sold 2 trillion dong ($96 million) of 364-day bills at an average yield of 7.69 percent yesterday, compared with 8 percent on Jan. 7, according to a posting on the Hanoi Stock Exchange website. Borrowing costs declined as demand for sovereign notes increased at banks, according to Roy Fong, director of fixed income at VinaWealth Fund Management Joint-Stock Co. in Ho Chi Minh City.
“The inflation trend is going down, so we think interest rates will be coming down as well,” said Fong. “There will be lots of liquidity in the banking system, which should push investors to look at bonds.”
The two-year yield fell 20 basis points, or 0.20 percentage point, to 8.40 percent, the biggest decline since July 30, according to a daily fixing rate from lenders compiled by Bloomberg. The rate on five-year securities dropped 15 basis points to 9.30 percent, the lowest level since June 2009.
The value of outstanding loans increased by around 8.9 percent in 2012, according to a statement on Jan. 9 from the central bank, which is targeting 12 percent expansion in credit this year. Lending growth may be subdued in the first few months of 2013, Prime Minister Nguyen Tan Dung said in his New Year’s message posted on the government’s website Jan. 1.
The interbank overnight deposit rate dropped eight basis points to a four-day low of 3.63 percent, according to daily fixings by banks compiled by Bloomberg. The rate has fallen 87 basis points since Jan. 2, signaling banks’ funding availability has increased.
The dong traded at 20,842 per dollar as of 3:15 p.m. in Hanoi, compared with 20,843 yesterday, data compiled by Bloomberg show. The State Bank of Vietnam set its 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 daily fixing.