Vietnam bond fall on rising inflation, interbank rate

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Vietnam bonds fell on Tuesday, with yields reaching their highest in more than four months as investors were hesitant about a sharp rise in interbank rates and increasing inflation, analysts said.

Yields on government bonds on two-year terms increased 0.04 point to 7.44 percent, the highest since April 23, according to Reuters fixings data.

One-year bond yields rose 0.069 point to 6.75 percent, passing a May 13 peak. Five-year bond yields were at 8.425 percent, the highest since May 14.

Vietnam's inflation was nearly flat between March and July but edged up 0.83 percent in August from the previous month, the government said in a weekend report.

Investors expect inflation would rise further in September as prices of healthcare and education services were climbing, said Nguyen Duy Phong, an analyst at VietCapital Securities.

The overnight interbank rate increased to 3.57 percent on Tuesday from 2.23 percent on the last trading day on Friday, according to Reuters data. Markets were closed on Monday for a public holiday.

"Local media reported some banks had raised their deposit rates on concern about a high inflation level. The increase in interbank rate pushed bond yields up in the short-term," Phong added.

The State Treasury and banks last week auctioned 10 trillion dong ($473 billion) worth of bonds but sold only 18 percent of that, or 1.775 trillion dong.

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