Vietnam's one-year bonds advanced, pushing the yield to the lowest level in nearly three years, on speculation the central bank will continue to cut interest rates to spur the economy. The dong weakened.
The planning ministry said Tuesday that growth may drop to as low as 5.2 percent in 2012, the least in more than a decade. The central bank last week cut interest rates for the third month in a row after official data showed inflation eased to 8.3 percent, the slowest pace since 2010.
"The government will keep loosening monetary policy to stimulate the economy, and that will affect short-term bond yields the most," said Nguyen Tan Thang, head of fixed-income research at Ho Chi Minh City Securities Corp.
The yield on one-year bonds fell five basis points, or 0.05 percentage point, to 8.59 percent, according to the midday fixing rate. That's the lowest level since July 24, 2009. The yield on the benchmark five-year bonds declined two basis points to 9.54 percent.
The dong fell 0.3 percent to 20,965 per dollar as of 2:43 p.m. in Hanoi Tuesday, according to data compiled by Bloomberg. The State Bank of Vietnam set its reference rate at 20,828, unchanged since Dec. 26, according to its website. The currency is allowed to trade up to 1 percent on either side of the rate.