Vietnam's Bond Yields Fall to 2007 Low on Inflation

TN News

Email Print

Vietnam's bonds rose, sending the benchmark five-year yield to the lowest level since 2007, after the government reported the slowest inflation in nine months. The dong was little changed.

Consumer prices climbed 6.36 percent this month from a year earlier after rising 6.61 percent in April, the General Statistics Office in Hanoi said May 24. Living costs declined 0.06 percent from last month. Slower inflation boosts returns from fixed-income securities.

The five-year yield slid nine basis points, or 0.09 percentage point, to 8.11 percent, the least since November 2007, according to a daily fixing from lenders compiled by Bloomberg. The rate on three-year notes fell 13 basis points to 7.08 percent, the lowest since June 2007.

"The drop in monthly inflation and surplus liquidity have prompted banks to increase investments in government debt," said Hoang Thanh Tam, head of the fixed-income department at Vietnam Maritime Commercial Joint-Stock Bank in Hanoi. "Bonds are still good investments, given the economic situation."

Bank credit in Vietnam expanded 2.29 percent as of May 22 from the end of 2012, the central bank said on its website today. The monetary authority targets a 12 percent lending expansion for the year. Interest rates on dong deposits dropped to as low as 5 percent at local lenders, compared with a regulatory limit of 7.5 percent, according to the statement.

Debt sales

Vietnam's State Treasury will increase total bond sales this year to 170 trillion dong ($8.1 billion), from an initial plan for 150 trillion dong, Dau Tu Chung Khoan magazine reported today, citing a treasury official it didn't identify. The government will offer 50 trillion dong of three-year notes and raise the remaining amount selling two-, five-, 10- and 15-year securities, according to the report.

The dong was at 21,000 per dollar as of 4:45 p.m. in Hanoi, data compiled by Bloomberg show. The State Bank of Vietnam set its reference rate at 20,828, unchanged since December 2011, according to its website. The currency is allowed to trade as much as 1 percent on either side of the daily fixing.

More Business News