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Bonds rise further on rate-cut speculation, dong little changed
Five-year bonds gained for a third day on speculation that policy makers will add to six interest-rate cuts since the start of October to spur the economy. The dong was little changed.
The benchmark five-year note posted a second weekly gain this week as the State Bank of Vietnam slashed the benchmark rate six times since October 20 to 7 percent, halving borrowing costs in the past four months.
The central bank would focus this year on sustaining growth after the economy expanded at the slowest pace in almost a decade in 2008, Governor Nguyen Van Giau said on February 10.
“Bond yields will decline on speculation of further interest-rate cuts by the central bank to help boost the economy,” Bui Tuan Trung, general director of Ho Chi Minh City-based Bao Viet Fund Management Co, said. “Commercial banks are still buying government debt because they cannot make loans at the moment with the slowing economy.”
The yield on the benchmark note dropped 0.09 percent to 8.46 percent this week, the lowest since November 23, 2007, according to a daily fixing price from seven banks compiled by Bloomberg.
The dong was little changed at VND17,484.50 per dollar in Hanoi, versus VND17,485.50 Thursday.
The State Bank set the reference rate for Friday’s dong trading at VND16,979 a dollar, versus VND16,977 Thursday, according to the bank’s website. The currency is allowed to trade up to 3 percent on either side of the official rate.
Vietnam Development Bank, a state-owned lender that raises capital for government projects, failed to sell debt at a scheduled auction Friday as there were no bidders, according to the Hanoi Securities Trading Center.
It had planned to sell VND1 trillion ($57 million) worth five-and 10-year notes.
Bloomberg
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