Vietnam Five-Year Bonds Drop as Last Week’s Rally Seen Excessive

Vietnam’s bonds fell, pushing up the 2019 yield by the most in five weeks, on speculation last week’s rally was excessive.

The yield on five-year government notes rose six basis points, or 0.06 percentage point, to 5.77 percent in Hanoi, a daily fixing from banks compiled by Bloomberg shows. That was the biggest increase since Aug. 12. The yield dropped 61 basis points last week in the steepest slide since January 2013.

“Bond yields have gone down too fast, so there must be some correction,” said Nguyen Tan Thang, a fixed-income investment director at Ho Chi Minh City Securities Joint-Stock Co. Yields are still in a downtrend thanks to economic stability, he said.

Fitch Ratings indicated last week that Vietnam may be moving closer to winning a credit-rating upgrade. Inflation eased to the slowest pace since 2009 in August, while the trade balance swung to a surplus.

“More likely than not” Vietnam will be upgraded in the next 12 to 18 months, Andrew Colquhoun, head of sovereign ratings for Asia Pacific, said at a conference in Singapore today. The nation’s rating may rise to BB-, three levels below investment grade, from B+ due to the “strengthening in external finances” and an improving economy, he said last week in an interview in London.

The dong was steady at 21,200 per dollar. The central bank fixed the currency’s reference rate at 21,246, unchanged since June 19, according to its website. The dong is allowed to trade as much as 1 percent on either side of the rate.

The State Treasury sold all of the 6 trillion dong ($283 million) of bonds it offered at an auction last week. It issued five-year notes at 5.79 percent, 10-year debt at 7.34 percent and 15-year securities at 8 percent, according to an e-mailed statement from Hanoi Stock Exchange.

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