Vietnam bonds gain after central bank tells lenders to cut rates

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Vietnam's two-year bonds rose on Monday, pushing the yield to the lowest level in more than two weeks, after the central bank asked lenders to reduce interest on outstanding loans. The dong was steady.

Banks must cut rates on existing credit to companies to less than 15 percent, State Bank of Vietnam Governor Nguyen Van Binh told a conference in Hanoi on July 7. Consumer prices rose 6.9 percent in June from a year earlier, the least since December 2009, official data show.

"The central bank's determination to reduce interest-rate levels as well as very favorable inflation" will boost demand for bonds, Bank for Investment & Development of Vietnam analysts including Hanoi-based Hoang Nu Ngoc Thuy and Nguyen Thu Linh, wrote in a research note on Monday. "Interbank rates may stay low, helping to keep borrowing costs at reasonable levels."

The yield on the two-year bonds fell five basis points, or 0.05 percentage point, to 9.50 percent, the lowest level since June 22, according to a daily fixing from banks compiled by Bloomberg.

The dong was unchanged at 20,880 per dollar as of 4:04 p.m. on Monday in Hanoi, according to data compiled by Bloomberg. The State Bank of Vietnam set the currency's reference rate at 20,828, unchanged since Dec. 26, according to its website. The dong is allowed to trade as much as 1 percent on either side of the rate.

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