Vietnam's bonds gained this week, with benchmark five-year yields falling by the most since 2010, on speculation lower interest rates at banks boosted demand for government debt. The dong fell.
"Interbank rates have dropped sharply, so banks have surplus cash to invest in bonds," said Do Hoang Quynh Trang, a fixed-income trader at Hanoi-based Ocean Commercial Joint-Stock Bank. "Lenders also have to replace maturing securities in their books."
Yields dropped after the overnight interbank deposit rate slumped 91 basis points, or 0.91 percentage point, to 9.88 percent this week, according to data from banks compiled by Bloomberg.
The yield on the five-year notes slid 35 basis points to 11.56 percent this week, according to daily fixing prices from banks compiled by Bloomberg. That was the biggest weekly decline since the five days ended June 25, 2010. The yield fell two basis points on Friday.
The dong declined 1 percent to 21,034 per dollar today as of 4 p.m. in Hanoi, according to data from banks compiled by Bloomberg. It dropped 0.9 percent this week.
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 that rate.