Vietnam's 1-year bonds gain as fuel-price cut may slow inflation

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Vietnam's one-year bonds advanced for the first time in four days on speculation last week's reduction in local fuel prices will help cool inflation. The dong was stable.

The nation cut costs of oil products by as much as 2.3 percent on Aug. 26 after consumer-price gains quickened to 23.02 percent, the most since November 2008, according to government data. The so-called 92-RON gasoline, the most commonly used fuel, was cut to 20,800 dong ($1) a liter from 21,300 dong, according to a statement on the government's website.

"The recent fuel price cut will lower input costs in industries, which in turn will help bring down prices and inflation," said Pham Minh Hoang, a fixed-income dealer at Ocean Commercial Joint-Stock Bank in Hanoi. "Yields at auctions will probably drop as banks will buy more bonds on expectation interest rates will decline next year."

The yield on the one-year note lost five basis points, or 0.05 percentage point, to 12.27 percent, according to a daily fixing from banks compiled by Bloomberg.

The dong was unchanged at 20,832 per dollar as of 4:30 p.m. in Hanoi, according to data compiled by Bloomberg. The central bank fixed the reference rate at 20,628, unchanged since Aug. 24, according to its website. The currency is allowed to trade up to 1 percent on either side of the rate.

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