Vietnam bonds drop after policy rates lifted to stem inflation

Vietnam’s benchmark five-year bonds fell this week after the country’s central bank raised three key policy rates as part of attempts to combat accelerating inflation. The dong weakened.

The State Bank of Vietnam increased refinancing and repurchase rates to 14 percent from 13 percent, and lifted the discount rate to 13 percent from 12 percent over the last seven days, as officials intensify the fight against the fastest rise in consumer prices in 28 months. Inflation surged to 17.51 percent in April from a year earlier, stoked by increases in fuel and electricity costs.

“Local institutions are staying on the sidelines due to inflation concerns and high deposit rates,” said Nguyen Thi Ngoc Anh, the Ho Chi Minh City-based head of fixed-income trading at Asia Commercial Bank. Bonds also fell after the latest government bond auction saw five-year debt sold with a higher coupon than offered in previous sales, she said.

The yield on five-year bonds rose 30 basis points, or 0.3 percentage point, this week to 12.77 percent according to daily fixing prices from banks compiled by Bloomberg. The rate advanced 10 basis points from yesterday.

The dong weakened 0.2 percent this week to 20,580 per dollar as of 4:20 p.m. Friday in Hanoi, according to data compiled by Bloomberg. The currency gained 0.2 percent Friday. – Bloomberg

Tags: Vietnam banking industry, Vietnam bonds, Vietnam finance, Vietnam financial

Posted by VBN on May 9 2011. Filed under Banking-Finance. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry