Vietnam bond yields hit 8-week highs

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Vietnam's bonds fell on Monday, with yields at the highest level in about eight weeks as a run of foreign selling continued and investors switched to more attractive options, traders said.

Yields on two, three and five-year bonds all rose on Monday as supply increased and demand slumped. Last week, government bond auctions had few takers and foreign investors sold off a net 1.93 trillion dong in bonds, according to Hanoi Stock Exchange data.

The yield on two-year government bonds rose 0.145 point to 7.11 percent on Monday, the highest since May 17, according to Reuters fixings data.

Three-year bond yields climbed 0.165 point to 7.425 percent and terms on five-year bonds were up 0.135 point to 8.16 percent. Both were the highest since the week of May 20.

Vietnam had the fastest-growing government bond market in emerging East Asia in the first quarter, the Asian Development Bank said in June.

Investors, however, were now looking at other options offering better returns.

"Investors are tempted to re-allocate their assets to those channels with the best growth prospects, which is the stock market right now," said a trader in Hanoi.

The government issued nearly $4.5 billion worth of bonds from the end of 2012 to July 5 in a bid to cover a budget deficit in the first half of 2013 that has swelled to 92.4 trillion dong.

But recent auctions have been largely unsuccessful. The State Treasury and banks had tenders last week for 6 trillion worth of bonds in two, three and five year terms, but only 100 million dong was sold.

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