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Bonds slump as central bank persists on unchanged rates
Vietnam’s five-year government bonds slumped, pushing yields up by the most in more than a year, after the central bank said it had no plans to raise interest rates to curb inflation at more than 25 percent.
Yields have risen almost 200 basis points since Fitch Ratings on May 29 cut the outlook on the nation’s debt to negative from stable, saying the government needs to raise rates to above inflation to guard against an economic crash.
The currency closed at its weakest since August last year.
“No one is buying,’’ said Le Duc Tho, head of the investment department at Industrial & Commercial Bank of Vietnam.
“Investors are selling their bonds to convert their money in to other forms of investment.”
The yield on the five-year bond rose 131 basis points to 16.73 percent, the highest since at least July 2006, according to a daily fixing price from 10 banks compiled by Bloomberg.
A basis point is 0.01 percentage point.
That was the biggest one-day rise in yields since at least March 2007.
The central bank has no plan to increase the benchmark interest rate, Nguyen Dong Tien, a deputy governor of the State Bank of Vietnam, has said.
After the central bank raised the base rate from 8.75 percent to 12 percent from May 19, banks have set their deposit rates at about 15 percent.
Saigon Commercial Joint-Stock Bank last week raised its deposit rate to 16 percent.
Thanhnien
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