Vietnam's three-year bonds rallied by the most since August on speculation banks invested surplus cash in debt amid a slowdown in credit growth. The dong was little changed.
Vietnamese lenders bought 89 percent of the VND132.3 trillion ($6.3 billion) of notes issued by the government this year, the Dau Tu Chung Khoan magazine reported on Friday. Banks stepped up purchases of the securities as slowing economic growth curbed lending and swelled their capital, said Nguyen Tan Thang, fixed- income investment director at Ho Chi Minh City Securities Joint- Stock Co.
"For banks there are no attractive or promising investment channels apart from buying bonds," he said. "It's all about liquidity and most of the buyers are banks."
The yield on three-year bonds fell 25 basis points, or 0.25 percentage point, to 9.40 percent this week, according to a daily fixing from banks compiled by Bloomberg. That's the fifth straight weekly decline and the biggest since Aug. 3.
Vietnam's economy may expand 5.2 percent this year, the government forecast in September, the slowest pace since the 4.8 percent growth posted in 1999, according to International Monetary Fund data.
The dong traded at 20,853 per dollar as of 3:37 p.m. Friday in Hanoi, compared with 20,865 on Thursday, and little changed from a week ago, according to data compiled by Bloomberg.
The State Bank of Vietnam set its reference rate at 20,828, unchanged since Dec. 26, according to its website. The currency is allowed to trade as much as 1 percent on either side of the fixing.