Vietnamese bonds rise on outlook for lending rates; dong drops

Vietnam’s five-year bonds rose on optimism borrowing costs are headed lower. The dong dropped as the central bank set a lower reference rate.
The State Bank of Vietnam aims to lower dong lending rates to a range of 17 percent to 19 percent starting mid-September through to the end of 2011, newly appointed Governor Nguyen Van Binh said this month.

Lending rates have exceeded 20 percent this year. Government notes snapped a two-day drop as official data released today showed consumer prices rose 0.93 percent from a month earlier in August after having increased 1.17 percent the prior month.

“Commercial banks are expecting interest rates will go down as the central bank has shown its determination,” said Luu Hai Yen, a Hanoi-based analyst at Thang Long Securities Joint- Stock Co. “The slowing of inflation on a monthly basis is also a signal for banks to reduce lending rates.”

The yield on the nation’s five-year bonds fell two basis points, or 0.02 percentage point, to 12.55 percent, according to a daily fixing from banks compiled by Bloomberg.

The dong fell 0.1 percent to 20,831 per dollar as of 3:46 p.m. in Hanoi, according to prices from banks compiled by Bloomberg.

The central bank set the currency’s reference rate at 20,628 today, from 20,618 yesterday, its website showed. The currency is allowed to trade up to 1 percent on either side of the official rate.
Bloomberg

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