Vietnam's bonds decline as interbank rates rise; dong steady

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Vietnam's bonds declined, driving the three-year yield to the highest level in almost eight weeks, as a cash squeeze cooled banks' demand for government debt. The dong was little changed.

The yield on benchmark notes due 2015 climbed five basis points to 9.73 percent, the highest level since May 9, according to a daily fixing from banks compiled by Bloomberg. The overnight interbank deposit rate rose 50 basis points, or 0.50 percentage point, to 5.47 percent.

"Higher interbank rates showed some banks may have less cash available," said Pham Phuong Lan, the Hanoi-based head of fixed-income and currency trading at the Bank for Investment & Development of Vietnam. "Demand for bonds seems to have declined lately."

The dong traded at 20,890 per dollar as of 4:15 p.m. in Hanoi, compared with 20,985 yesterday, according to data from banks compiled by Bloomberg. The central bank set the reference rate at 20,828 per dollar, unchanged since Dec. 26, according to its website. The currency is allowed to fluctuate by as much as 1 percent on either side of the official rate.

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