Vietnam bonds rise as banks lower interest rates

Vietnam’s bonds advanced, pushing yields to a six-week low, as demand for sovereign debt was bolstered after banks started cutting interest rates to comply with a central bank request. The dong was stable.

Bank for Investment and Development of Vietnam, the country’s second-largest lender, will join other banks to reduce its commercial lending rates to below 20 percent from today, it said in a statement yesterday. The State Bank of Vietnam aims to lower dong lending rates to 17 percent to 19 percent from mid- September, Governor Nguyen Van Binh said last month.

The yield on the five-year bond fell four basis points, or 0.04 percentage point, to 12.46 percent, according to a daily fixing price from banks compiled by Bloomberg. That was the lowest level since July 22.

“Investors expect bond yields to drop as banks are lowering interest rates on the central bank’s recent request,” said Do Thi Lan Anh, a fixed-income dealer at Vietnam Technological and Commercial Joint-Stock Bank in Hanoi.

The dong was little changed at 20,827 per dollar as of 5:43 p.m. in Hanoi, according to bank data compiled by Bloomberg. The central bank set the reference rate at 20,628 today, unchanged from Aug. 24, according to its website.