Vietnam Bond Yield Drops to 2007 Low After Sale; Dong Steady

Vietnam’s bonds rose, sending the five-year yield to the lowest level since 2007, after borrowing costs fell at yesterday’s government debt sale. The dong was little changed.

The State Treasury sold 2 trillion dong ($95 million) of five-year notes to yield 7.78 percent yesterday, according to the Hanoi Stock Exchange website. That compares with 8.23 percent at the previous auction on May 21. The overnight interbank rate declined 11 basis points to 0.89 percent today, according to data compiled by Bloomberg.

Low interbank rates “might indicate that the liquidity stance in the overall banking system remains comfortable,” Pham Thuy Linh and Trinh Quang Dung, analysts at Hanoi-based Vietcombank Securities Co., wrote in a research note. “Given current ample liquidity of the banking system and strong appetite of bond traders,” short- to mid-term bond yields would drop further, they wrote.

The yield on five-year notes dropped eight basis points, or 0.08 percentage point, to 7.84 percent in Hanoi, the lowest since August 2007, according to a daily fixing from banks compiled by Bloomberg.

The dong traded at 21,008 per dollar as of 4:15 p.m. in Hanoi, compared with 21,013 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.

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