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Bonds advance on rate-cut speculation; dong strengthens
Five-year bonds advanced for the first time in six days on speculation the central bank will cut interest rates to spur economic growth. The dong rose.
Benchmark yields slipped from a one-month high as the State Bank of Vietnam said February 22 it would seek to expand loans and apply “reasonable” interest rates to stem a slowdown amid the global economic slump.
Vietnam has slashed the key rate six times since mid-October to 7 percent, halving borrowing costs as growth cooled to a nine-year low in 2008.
“There is speculation that policy makers may cut the benchmark interest rate by 0.5 percent,” Do Hoang Quynh Trang, a fixed-income trader at Hanoi-based Ocean Commercial Joint-Stock Bank said Monday.
The yield on the five-year note dropped 4 basis points to 8.62 percent, according to a daily fixing price from eight banks compiled by Bloomberg. One hundred basis points make up 1 percent.
Increasing debt sales by the government may temper gains in bonds, Trang said. Prime Minister Nguyen Tan Dung said last week that Vietnam may sell an additional VND11.5 trillion (US$658 million) of local-currency bonds this year.
The State Treasury plans to sell VND1 trillion ($57 million) worth of securities this week, according to an e-mailed statement from the Hanoi Securities Trading Center, where the auction will take place.
“In the short term, sellers still outnumber buyers,” Trang said.
The dong traded at 17,478.50 per dollar in the interbank market in Hanoi, versus 17,482.50 last week, according to data compiled by Bloomberg.
The bank strengthened its reference rate to 16,972 dong per dollar Monday from 16,974 on Friday and 16,981 a week ago, according to its website. The currency is allowed to trade up to 3 percent on either side of that rate.
Bloomberg
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