Yields on Vietnam's two-year bonds yields rose to the highest in 12 weeks on Thursday as domestic banks sought to step up disbursement, using bonds to generate money to subsidise business costs.
The two-year bond yields increased 0.02 point to reach 7.35 percent, the highest since May 7, according to Reuters fixings data.
The yields on one-year and three-year government bonds stood unchanged from Wednesday, which were the highest since May 20 and May 10 respectively. Five-year bond yields edged up 0.09 point, passing the May 20 peak.
"Banks wanted to both balance their investment portfolios by disbursement and increase their fund inflow. To do so, they increased the credit growth by investing in bonds," a local investment analyst said.
He added that even though bonds were no longer as attractive as stocks and liquidity in the bond market remained weak, bonds were still believed to be a safe investment option.
Moreover, the country's inflation was expected within the full-year target of 6 percent to 7 percent, with the 5 percent electricity price hike on Thursday inclusive, the central bank would increase bonds yields to control the monetary market, he said.
Vietnam had the fastest-growing government bond market in emerging East Asia in the first quarter of the year, the Asian Development Bank said.
But demand has since receded, with the State Treasury and the Vietnam Development Bank only able to raise 325 billion dong ($15.4 million), or a third of the 11.5 trillion dong worth of bonds on offer in the last three auctions.