Vietnam’s Two-Year Bonds Have Their Worst Week Since April 2011

Vietnam’s two-year bonds had their worst week in more than 21 months on speculation banks shunned debt purchases as they conserved cash to meet holiday demand. The dong was steady.

The State Treasury sold 3.81 trillion dong ($183 million) of four trillion dong of two-year notes offered at an auction Jan. 30, according to the Hanoi Stock Exchange website. The notes sold at 8.64 percent, 20 basis points more than for similar-maturity securities at the previous sale on Jan. 11. Vietnam’s financial markets will be shut Feb. 11-15 for the Lunar New Year holiday, known locally as Tet. Celebrations begin Feb. 9 and end Feb. 17.

“We are moving closer to Tet so many banks prefer to keep their liquidity rather than invest,” said Nguyen Duy Phong, Ho Chi Minh City-based analyst at Viet Capital Securities Co.

The yield on two-year bonds rose 40 basis points, or 0.40 percentage point, to 8.68 percent, this week, according to a daily fixing rate from banks compiled by Bloomberg. That’s the biggest jump since the five-day period ended April 22, 2011. The yield was unchanged from yesterday.

The dong traded at 20,843 per dollar as of 2:58 p.m. in Hanoi, compared with 20,845 yesterday, according to data compiled by Bloomberg. The currency was little changed this week.

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.