Vietnam's bonds rose Thursday on speculation policy makers will take steps to improve the supply of cash in the banking system, boosting demand for government securities. The dong strengthened.
Prime Minister Nguyen Tan Dung instructed the central bank to "solve" liquidity problems in the banking system in the first quarter, according to the government's website. Dung also asked the State Bank of Vietnam to closely monitor the market in order to reduce lending interest rates at a "suitable" time, according to the statement.
"When liquidity in the money market improves, better fund flows will support the bond market," said Tran Kieu Hung, a Hanoi-based bond trader at Bank for Investment & Development of Vietnam. "Investors will also have to buy bonds to make up for a large amount of securities maturing soon."
The yield on the government's five-year bonds slid two basis points, or 0.02 percentage point, to 12.36 percent, according to daily fixings from banks compiled by Bloomberg.
The dong rose for a third day, gaining 0.1 percent to 20,910 per dollar as of 3:10 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.
In the so-called black market, the dong traded between 20,870 and 20,900 per dollar at gold shops in Hanoi Thursday, compared with between 20,940 and 20,980 yesterday, according to a telephone information service run by state-owned Vietnam Posts & Telecommunications.