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Vietnam Five-Year Bonds Have Best Month Since May on Bank Buying

Vietnam’s benchmark five-year bonds had their largest monthly gain since May on speculation that credit demand remained weak in January, spurring banks to buy debt with surplus cash. The dong was steady.

Bank liquidity increased 0.2 percent as lending fell 1.1 percent in the first three weeks of 2013, the government said in a statement distributed at its monthly press briefing on Jan. 29. Credit growth may remain slow in the first months of the year, Prime Minister Nguyen Tan Dung said in a New Year’s message on Jan. 1, after a slowdown in economic growth and rising bad debts crimped lending in 2012.

“The liquidity of the banking system overall is quite comfortable, credit growth is low, so the banks are buying bonds,” said Pham Thuy Linh, a Hanoi-based analyst at Vietcombank Securities Co. Ltd.

The yield on five-year bonds fell 58 basis points in January, or 0.58 percentage point, to 9.17 percent, according to a daily fixing rate from banks compiled by Bloomberg. That’s the fourth month in a row that yields have fallen. The rate was little changed from yesterday.

The dong traded at 20,845 per dollar as of 2:01 p.m. in Hanoi, compared with 20,848 yesterday, according to data compiled by Bloomberg. The currency weakened 0.05 percent this month.

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 up to 1 percent on either side of the rate.

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