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Vietnam’s Bonds Decline as Banks Hoard Cash Ahead of Tet Holiday

Feb. 7 (Bloomberg) -- Vietnam’s two-year government bonds fell for the first time in a week on speculation banks are hoarding cash before next week’s Lunar New Year holiday. The dong was little changed.

The overnight interbank deposit rate rose 29 basis points to 4.07 percent today, taking its five-day gain to 173 basis points, according to daily fixings by banks compiled by Bloomberg. Financial markets will be shut Feb. 11 through Feb. 15 for the holiday, known locally as Tet.

“Demand is weak as investors are inactive before the long holiday,” said Nguyen Duy Phong, a Ho Chi Minh City-based analyst at Viet Capital Securities Co. “Banks also have to conserve liquidity, so they limit investment.”

The yield on the two-year bonds rose four basis points, or 0.04 percentage point, to 8.67 percent, according to a daily fixing rate from banks compiled by Bloomberg.

The dong traded at 20,828 per dollar as of 3:44 p.m. in Hanoi, compared with 20,830 yesterday, according to data compiled by Bloomberg. 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 rate.

To contact Bloomberg News staff for this story: Diep Ngoc Pham in Hanoi at dpham5@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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