Vietnam Five-Year Debt Yield Falls to Seven-Year Low on Rate Cut

Vietnam’s five-year bonds rallied, pushing the yield to the lowest level in almost seven years, after the central bank cut interest rates amid speculation banks have ample surplus cash.

The five-year yield fell 17 basis points to 7.08 percent, the lowest level since April 2007, according to a daily fixing from banks compiled by Bloomberg. The yield has dropped 82 basis points, or 0.82 percentage point, this month.

The State Bank of Vietnam said yesterday it will lower its refinancing rate to 6.5 percent from 7 percent and the discount rate to 4.5 percent from 5 percent. The repurchase rate was reduced to 5 percent from 5.5 percent. All of the cuts are effective today. Outstanding loans dropped 1.66 percent as of Feb. 20 from the end of last year, the central bank said in a Feb. 28 statement.

“Banks have abundant cash as they haven’t lent out too much so far this year so they have money to buy government bonds,” said Nguyen Thi Mai Anh, a Hanoi-based analyst at Bank for Investment and Development of Vietnam. “Bond yields fell a lot today also because of the rate cut announcement.”

The dong was little changed at 21,098 per dollar as of 5:51 p.m. in Hanoi, according to data compiled by Bloomberg. The central bank set its reference rate at 21,036, unchanged since June 28, according to its website. The currency is allowed to trade as much as 1 percent on either side of the fixing.

— With assistance by Giang Nguyen

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