Vietnam Currency Discussion Board

[RICK C]

Nov 1, 2008
Bonds rise, capping fourth monthly gain; dong advances




Five-year bonds rose Friday, completing a fourth straight monthly gain, as high interest rates deterred borrowing, prompting banks to steer funds into government debt. The dong advanced, paring its October loss.

The yield on the benchmark note dropped 35 basis points in October to 15.52%, from 15.87% September, according to a daily fixing price from 10 banks compiled by Bloomberg. A percentage point consists of 100 basis points.

“Banks have had a surplus of cash as companies are not borrowing because of high interest rates,” Vu Thanh Tu Anh, director of research of the Fulbright Economic Teaching Program in Ho Chi Minh City, said. “They are putting money in government bonds so demand for the note has increased.”

Slowing inflation and the prospect of interest-rate cuts are also helping boost demand for bonds.

Consumer prices decreased 0.2% in October, the first decline in more than a year and a half. The central bank’s benchmark interest rate, which was cut by a percent to 13% on October 20, is still the highest in Asia, along with Pakistan’s.

The currency weakened by 1.4% this month, the biggest monthly drop since June. The dong traded at 16,830 per dollar as of 4:18 p.m. in Hanoi Friday, compared with 16,837 late Thursday and 16,600 at the end of September, according to data compiled by Bloomberg.

The State Bank of Viet Nam fixed the reference rate at VND16,511, compared with VND16,512 Thursday, according to its website. The currency is allowed to trade by up to 2% on either side of the official rate. (Bloomberg)



http://www.vnstocknews.com/2008/11/bonds-rise-capping-fourth-monthly-gain.html