Vietnam Bond Yields Extend Fall Ahead of Government Debt Sales

Vietnam’s bonds rose for a fourth day, pushing the five-year yield to its lowest level since February 2009, on speculation auction yields will slide further. The dong was unchanged.

The State Treasury will offer 7 trillion dong ($334 million) of government debt tomorrow, according to the Hanoi Stock Exchange website. It sold 3 trillion dong each of three- and five-year notes last week to yield 8.18 percent and 8.84 percent, respectively, compared with 8.45 percent and 9.2 percent at the previous offering.

“As banks focus on dealing with bad debt and are more cautious in disbursing money for new loans, their funds are flowing to bonds as this investment channel has low risk, high liquidity and attractive interest rates,” Hanoi-based Bao Viet Securities Co. analysts Ha Thi Thu Hang and Nguyen Thanh Khiem wrote in a research note e-mailed today.

The five-year yield fell eight basis points, or 0.08 percentage point, to 8.82 percent, the lowest level since Feb. 24, 2009, according to a daily fixing from lenders compiled by Bloomberg.

The State Bank of Vietnam lowered its benchmark refinance rate to 8 percent from 9 percent and the discount rate to 6 percent from 7 percent effective March 26. It reduced a rate cap on dong deposits with terms ranging from a month to less than a year to 7.5 percent from 8 percent. Inflation eased to 6.64 percent in March, the slowest pace since September 2012, from 7.02 percent in February, according to the Hanoi-based General Statistics Office.

The dong traded at 20,945 per dollar as of 2:25 p.m. in Hanoi, unchanged from yesterday, 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.