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Vietnam bonds decline on inflation outlook; dong little changed
Vietnam’s five-year bonds declined on speculation inflation will start accelerating by the end of the year after the government raised gasoline prices by 8 percent last week. The dong was little changed.
Gasoline prices are now 20 percent higher than three months ago after the Ministry of Finance on June 10 allowed state-run fuel retailers to raise prices by 8 percent. Inflation in the country eased to 5.6 percent in May after climbing to 28.3 percent in August 2008, the quickest since at least 1992.
“There’s speculation that inflation will return by the end of this year,” reducing the appeal of bonds, Huynh Thi Thanh Van, Head of the Capital-markets division at Sacombank Securities Co. said in a telephone interview Monday.
The yield on the five-year note climbed two basis points to 9.24 percent, according to a daily fixing price from 10 banks compiled by Bloomberg. A basis point is 0.01 percentage point.
Bonds also fell as local banks increased deposit rates to raise funds, Van said.
Vietnamese banks raised interest rates on dong deposits to as high as 10 percent, from an average 9 percent to attract more funds, local lenders said. Demand for loans from companies has increased after the government said in January it will spend VND17 trillion ($953 million) to subsidize funds for companies involved in exports, imports and manufacturing, according to the report.
Vietnam’s dong traded little changed at 17,796 per dollar as of 3:55 p.m. in Hanoi Monday, from 17,794 on June 12.
The State Bank of Vietnam set the reference rate at VND16,949 per dollar today, compared with VND16,947 late last week, according to its website. The currency is allowed to trade up to 5 percent on either side of the official rate.
thanhnien, bloomberg
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