Vietnam Five-Year Bond Yield Falls to 2009 Low on Rate-Cut Bets

Vietnam’s bonds rose for a fourth day, pushing the five-year yield to the lowest since June 2009, on speculation the central bank will add to last year’s six interest-rate cuts to support the economy. The dong weakened.

Prime Minister Nguyen Tan Dung ordered the State Bank of Vietnam to pursue policies in 2013 that spur lending and growth while containing inflation and maintaining the dong’s value, according to a Jan. 10 statement on the monetary authority’s website. The State Treasury sold 1 trillion dong ($48 million) of five-year notes at 9.30 percent on Jan. 11, according to the Hanoi Stock Exchange’s website. It paid 9.65 percent to issue similar-maturity debt at a Dec. 27 sale.

“We believe that interest rates could be stabilized or slightly decrease this week, and it seemed that the market is expecting another rate cut in the first quarter in 2013,’ analysts at Saigon Securities Inc. wrote in a research note.

The five-year bond yield fell four basis points, or 0.04 percentage point, to 9.15 percent, according to a daily fixing from banks compiled by Bloomberg. That’s the lowest level since June 5, 2009. The overnight interbank deposit rate dropped 25 basis points to 3.25 percent, the lowest since Dec. 25, according to banks’ data compiled by Bloomberg.

The central bank last lowered borrowing costs on Dec. 24. In 2012, the refinancing rate was cut by a total 6 percentage points to 9 percent.

The dong traded at 20,848 per dollar as of 3 p.m. in Hanoi, compared with 20,845 yesterday, according to data compiled by Bloomberg. The central bank set its reference rate at 20,828, unchanged since Dec. 26, 2011, according to its website. The currency is allowed to trade as much as 1 percent on either side of the fixing.