Vietnam bonds decline as inflation accelerates to 29-month high

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Vietnam's three-year bonds declined, pushing yields to the highest level since November 2008, after inflation accelerated to a 29-month high in May. The dong gained.

Prices rose 19.78 percent from a year earlier, compared with 17.51 percent in April, according to data released by the General Statistics Office in Hanoi Tuesday. That's the quickest pace since December 2008.

"Given quickening inflation, banks will demand higher bond yields, especially in the primary market," said Pham Minh Hoang, a fixed-income dealer at Ocean Commercial Joint-Stock Bank in Hanoi.

The yield on the three-year bonds rose eight basis points, or 0.08 percentage point, to 12.74 percent, according to a daily fixing from banks compiled by Bloomberg. The dong strengthened 0.4 percent to 20,630 per dollar as of 3:35 p.m. in Hanoi, according to data compiled by Bloomberg.

The central bank fixed the reference rate at 20,668 Tuesday, compared with 20,673 yesterday, according to its website. The currency is allowed to trade up to 1 percent on either side of that rate.

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