Vietnam bonds rise to one-year high on rate outlook; dong gains

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Vietnam's five-year bonds rose on Tuesday, pushing their yield to the lowest level in more than a year, on speculation interest rates will be cut. The dong advanced.

The State Bank of Vietnam instructed lenders to "reduce interest rates to levels that are suitable to the macroeconomic situation," according to a statement posted on its website on Feb. 13. Consumer prices rose 16.44 percent in February from a year earlier after increasing 17.27 percent in January, according to government data.

"Yields dropped probably because investors expect the central bank will soon reduce interest rates," said Cao Tan Phat, a Ho Chi Minh City-based analyst at ACB Securities Inc. "Some commercial banks have already cut deposit rates."

The yield on five-year notes fell three basis points, or 0.03 percentage point, to 11.53 percent as of 3:57 p.m. in Hanoi on Tuesday, according to a daily fixing from banks compiled by Bloomberg. That was the lowest level since Feb. 21 last year.

The dong gained 0.3 percent to 20,830 per dollar, according to data compiled by Bloomberg. The central bank set the reference rate unchanged 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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