The yield on Vietnam’s five-year government bonds fell to the lowest level since 2007 on speculation interest rates will be cut as inflation slows.
The weekly drop in the yield was the biggest since March after central bank Governor Nguyen Van Binh told lawmakers in Hanoi yesterday that the regulator will take measures to bring down commercial lending rates. Consumer-price gains slowed for a fourth month in May, rising 6.36 percent from a year earlier.
The yield on the five-year bonds slumped 43 basis points, or 0.43 percentage point, this week to 7.78 percent, according to a daily fixing from lenders compiled by Bloomberg. That was the biggest decline since the period ended March 29 and the lowest level since August 2007. The rate on the three-year notes dropped 46 basis points this week to 6.74 percent.
“We are constructive on Vietnam government bonds on easing inflation and credit growth,” analysts at Standard Chartered Plc including Hong Kong-based Betty Wang, wrote in a research note e-mailed May 29. The central bank may cut the refinancing rate by 50 basis points to 6.5 percent next quarter if policy makers “remain comfortable with the inflation outlook and credit growth stays anemic,” they wrote, adding a 7.5 percent cap on dong deposit rates could also be reduced.
The dong fell 0.1 percent this week and was steady today at 21,013 per dollar as of 5:20 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.