Vietnam bonds drop after central bank lowers rates; dong steady

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Vietnam's bonds dropped after the central bank said it will cut benchmark interest rates from Tuesday to support economic growth. The dong was unchanged.

The State Bank of Vietnam will lower the refinancing rate to 14 percent from 15 percent, according to a statement on its website on Monday. It's the first reduction since 2009. The central bank will also cut its discount rate to 12 percent from 13 percent and the dong deposit cap for terms of one-month and more to 13 percent from 14 percent, it said.

The yield on the government's two-year notes climbed seven basis points, or 0.07 percentage point, to 11.54 percent, according to a daily fixing from banks compiled by Bloomberg.

"Traders had already anticipated this move and priced the rate reduction into bond yields," said Tran Kieu Hung, a Hanoi-based bond trader at Bank for Investment & Development of Vietnam.

The dong traded at 20,830 per dollar as of 4:30 p.m. in Hanoi, according to data compiled by Bloomberg. The central bank set the daily reference rate at 20,828, unchanged since Dec. 26, its website showed. The currency is allowed to trade up to 1 percent on either side of the rate.

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