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Bonds gain as banks eye more debt
Vietnam's five-year bonds gained for a fourth day on speculation the nation's banks will purchase more of the securities as the central bank cuts interest rates.
Local lenders have lowered deposit and lending rates after the central bank last week reduced its benchmark interest rate to 13 percent from 14 percent. The average lending rate declined to about 18 percent from as high as 21 percent, according to the government website.
“Demand is rising with local banks since bond yields are at attractive levels compared with deposit and lending rates, which are predicted to continue their downtrend,” said Nghiem Ngoc Minh, capital management department head at the Bank for Agriculture and Rural Development.
The yield on the five-year note fell 27 basis points to 15.45 percent, the lowest since May, according to a daily fixing price from 10 banks compiled by Bloomberg. A basis point is 0.01 percentage point.
“Given the world financial turmoil, many banks, including us, have chosen to invest in bonds instead of making more loans,” Minh said.
The dong gained 0.01 percent to VND16,842 per dollar as of 4:04 p.m.in Hanoi.
The State Bank of Vietnam set the reference rate for the currency at VND16,515 per dollar Tuesday, compared with VND16,517 Monday. The currency is allowed to trade as much as 2 percent on either side of the official rate.
The rate on non-deliverable forwards, derivatives contracts which are traded offshore, has risen in the past two days. The rate on the 12-month contract climbed to VND21,900 per dollar, according to data compiled by Bloomberg, suggesting traders see a 23 percent decline in the dong in the coming year.
Thanhnien
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