Vietnam 5-year bonds have worst week since October

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Vietnam's five-year bonds completed the worse week since October on speculation faster inflation will reduce room for the central bank to cut interest rates. The dong was stable.

Consumer prices rose 7.07 percent this month from a year earlier, after rising 6.81 percent in December, the General Statistics Office said in Hanoi yesterday. The median estimate in a Bloomberg survey of six economists was 6.95 percent. The State Bank of Vietnam lowered borrowing costs six times last year to spur economic expansion.

"The State Bank of Vietnam will be more cautious about further easing," Viet Capital Securities's analysts wrote in a research to investors today.

The yield on the five-year notes climbed seven basis points, or 0.07 percentage point, this week to 9.07 percent, the biggest increase since the five days ended Oct. 12, according to a daily fixing from banks compiled by Bloomberg. The three-year yield rose three basis points to 8.48 percent.

The overnight interbank deposit rate climbed 13 basis points this week to 2.13 percent, making it costlier to buy debt with borrowed funds.

Prime Minister Nguyen Tan Dung ordered the central bank to pursue policies in 2013 that spur lending and growth while containing inflation and maintaining the dong's value, according to a Jan. 10 statement on the monetary authority's website. The central bank last cut borrowing costs on Dec. 24. The refinancing rate was cut by a total 6 percentage points in 2012 to 9 percent.

Debt sales

The State Treasury sold 156 trillion dong ($7.5 billion) of debt in 2012, a 92 percent increase from 2011, Thoi Bao Ngan Hang newspaper reported Jan. 18, citing official data. It plans to raise 30 trillion dong this quarter, according to the paper.

The dong traded at 20,840 per dollar as of 4 p.m. in Hanoi, compared to 20,848 yesterday, according to data compiled by Bloomberg. The central bank set the daily reference rate at 20,828, unchanged since Dec. 26, 2011 its website showed. The currency is allowed to trade up to 1 percent on either side of the rate.

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