Vietnam's bonds drop as interbank rates surge; dong strengthens

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Vietnam's three-year bonds dropped on Monday, pushing their yield to a six-week high, as surging money-market rates deterred investors from buying sovereign debt. The dong strengthened the most since March.

The overnight interbank deposit rate jumped 115 basis points to a two-month high of 5.98 percent, according to data compiled by Bloomberg. "Bond yields increased as investors rushed to sell risk-free assets after seeing interbank interest rates rose significantly," said Ho Chi Minh City-based Nguyen Duy Phong, an analyst at Viet Capital Securities Co.

The yield on the government's benchmark three-year bonds rose four basis points, or 0.04 percentage point, to 9.6 percent, according to a daily fixing from banks compiled by Bloomberg. That's the highest level since May 10.

The dong strengthened 1.1 percent to 20,918 per dollar as of 4:38 p.m. Monday in Hanoi, according to data compiled by Bloomberg. The central bank fixed the reference rate at 20,828, a level unchanged since Dec. 26, according to its website. The currency is allowed to trade as much as 1 percent on either side of the rate.

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