Vietnam bond yields drop for 5th day on bank demand

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Vietnam's bonds rose, pushing benchmark yields lower for a fifth day, on speculation banks increased their holdings as lending slowed. The dong was steady.

The overnight interbank deposit rate has slumped to 0.94 percent from a 2013 high of 4.5 percent on Jan. 2, according to daily fixings by banks compiled by Bloomberg, amid weak credit growth. Bank loans increased 2.29 percent this year through May 22, the central bank said on its website yesterday. That compares with the authority's full-year target of 12 percent.

The yield on five-year notes dropped 15 basis points, or 0.15 percentage point, to 7.97 percent in Hanoi, according to daily fixing from banks compiled by Bloomberg. The rate on three-year notes fell 11 basis points to 6.97 percent, the lowest since June 2007.

"Demand for bonds is strong because yields are still at pretty attractive levels compared with interest rates in the interbank market," said Nguyen Thi Ngoc Anh, head of fixed- income trading at Asia Commercial Bank in Ho Chi Minh City.

The dong traded at 20,998 per dollar as of 4 p.m. in Hanoi, little changed from yesterday, according to data compiled by Bloomberg. The State Bank of Vietnam set its reference rate at 20,828, unchanged since December 2011, according to its website. The currency is allowed to trade as much as 1 percent on either side of the fixing.

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