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Five-year bonds drop as investors sell to buy short-term bills
Five-year bond dropped for the first time in three days on speculation investors sold the note to buy short-term bills. The dong was little changed.
The yield on the benchmark security rose by the most in almost three weeks on concern government stimulus spending to revive the economy will quicken inflation in the coming months
The increase in yields to a one-week high indicates investors are demanding more to own longer maturities, those most sensitive to inflation.
“People are selling long-term bills buy short-term bills," said Trinh Hoai Giang, deputy general director at the Ho Chi Securities Corp “Investors expect that with the government’s stimulus package inflation will quicken in the next year.”
The yield on the benchmark note climbed 8 basis points, the most since January 21, to 8.6 percent, according to a daily fixing price from nine banks compiled by Bloomberg. A basis point is 0.01 percentage point.
The yield on the one-year security dropped 4 basis points, to 8.18 percent the lowest since April 22.
The government agreed January 15 to use VND17 trillion (US$972 million) from its $6 billion stimulus package to subsidize loans and boost lending.
Central bank governor Nguyen Van Giau said Tuesday the State Bank of Vietnam would manage the exchange rate and interest rates in a “flexible manner” to prevent economic slowdown, keep inflation at a reasonable pace and stabilize money markets.
The currency was little changed at VND17,482.50 per dollar against VND17,482 on Monday.
The central bank set Tuesday’s reference rate at VND16,976 per dollar, versus VND16,975 on Monday, according to its website. The currency is allowed to trade by up to 3 percent on either side of the official rate.
Bloomberg
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