Vietnam bonds gain as cash crunch eases; dong strengthens

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Vietnam's five-year bonds gained on Monday, pushing their yield to the lowest level since April, on speculation commercial banks will boost holdings of government debt as a cash crunch eases. The dong strengthened.

"As the banking system's liquidity continued to see an improvement and the government has requested the central bank to have specific measures to reduce interest rates, we expect yields on short and mid-terms bonds to keep declining in coming days," ACB Securities Inc. analysts including Cao Tan Phat, who is based in Ho Chi Minh City, wrote in a report obtained Monday.

Prime Minister Nguyen Tan Dung instructed the State Bank of Vietnam to "solve" liquidity problems in the banking system in the first quarter, the government said in a statement on its website late last week. Dung also asked the central bank to closely monitor the market with a view to reducing lending interest rates at a "suitable" time.

Yields on five-year debt fell two basis points, or 0.02 percentage point, to 12.34 percent as of 3:05 p.m. in Hanoi on Monday, according to a daily fixing from banks compiled by Bloomberg.

The dong rose 0.1 percent to 20,853 per dollar, according to data compiled by Bloomberg. The central bank set the reference rate at 20,828, its website showed. The currency is allowed to trade as much as 1 percent on either side of the official rate.

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