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Bonds advance on rate cut speculation
Five-year bonds gained for a second day after a report said banks are awash with liquidity, signaling policy makers may have to cut the base interest rate to help spur lending.
Benchmark yields slid to the lowest in nine months as the surplus of dong funds pushed the interest rate for overnight loans down to 4.41 percent from 5.96 percent.
“Commercial banks have a surplus of dong,” Pham Thu Ha, deputy manager of fixed-income department at Hanoi-based Vietnam Technological and Commercial Joint-Stock Bank, known as Techcombank, said.
“They have certainly used the surplus to buy government debt as it is considered the most viable investment channel amid the economic downturn and the slumping equity market.”
The yield on the five-year note dropped to 8.55 percent, according to HSBC Holdings Plc. The debt yielded 9.33 percent, according to a daily fixing price from 10 banks compiled by Bloomberg.
Bond yields extended their decline on speculation that the government may cut rates soon, Tran Kieu Hung, Hanoi-based trader at Bank for Investment and Development of Vietnam, known as BIDV, said.
Vietnam has lowered its base rate five times from 14 percent in October to 8.5 percent on December 22 as the economy last year expanded at the slowest pace since 1999. Commercial banks use this benchmark to calculate their lending rate, which should not exceed 150 percent of the base rate.
Bloomberg
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