March 25 (Bloomberg) -- Vietnam’s bonds rose, driving the five-year yield to the lowest since February 2009, as slowing inflation allowed the central bank to cut interest rates to spur the economy. The dong was steady.
The State Bank of Vietnam lowered the refinance rate to 8 percent from 9 percent and the discount rate to 6 percent from 7 percent, effective March 26, according to a statement on its website today. It also reduced a rate cap on dong deposits due in a month to less than a year to 7.5 percent from 8 percent. Inflation decelerated to 6.64 percent in March, the slowest pace since September 2012, according to figures released March 23 by Hanoi-based General Statistics Office.
“Demand for government bonds is still energetic,” Pham Luu Hung, associate director of institutional research and investment advisory at Saigon Securities Inc., wrote in a note today. “Lower bond yields reflected short-term inflation stabilization and lower deposit rates.”
The five-year yield fell eight basis points, or 0.08 percentage point, to 8.92 percent, the lowest level since Feb. 25, 2009, according to a daily fixing from lenders compiled by Bloomberg.
The dong traded at 20,945 per dollar as of 3:50 p.m. in Hanoi, 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.
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