Vietnam's bonds rise as banks increase purchases; dong falls

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Vietnam's bonds gained Monday on speculation the largest banks are putting cash into debt rather than making loans. The dong dropped.

Vietnam Development Bank, a state-owned lender that raises funds for government projects, sold all of the VND1.9 trillion of bonds ($90 million) it auctioned on Dec. 16, according to statements on the Hanoi Stock Exchange's website.

"Large commercial banks don't want to lend in the interbank market since they are afraid that small commercial banks won't be able to repay debt," Ho Chi Minh City-based ACB Securities Co. analysts Cao Tan Phat and Le Nguyet Anh wrote in a research note on Dec. 16. "As such, the best investment channel for them is via the bond market."

Yields on three-year notes fell one basis point, or 0.01 percentage point, to 12.49 percent, according to a daily fixing from banks compiled by Bloomberg.

The dong fell 0.2 percent to 21,018 per dollar as of 3:30 p.m. in Hanoi Monday, according to data compiled by Bloomberg.

The central bank set the reference rate at 20,813, unchanged since Dec. 14, its website showed. The currency is allowed to trade as much as 1 percent on either side of the official rate.

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