Vietnamese bonds gain as overseas investors may step up purchases

Vietnamese bonds gain as overseas investors may step up purchases

Five-year bonds gained for a second day on speculation overseas investors will step up local debt purchases, betting the central bank will cut interest rates. The dong was little changed.

Benchmark yields slid this week to a 15-month low as the State Bank of Vietnam slashed the benchmark rate six times since October 20 to 7 percent, halving borrowing costs in the last four months. The economy, which expanded at the slowest pace in almost a decade in 2008, would worsen this year amid the global recession, Prime Minister Nguyen Tan Dung said on February 4. “Foreign investors increased their purchases Thursday and today,” said Huynh Thi Thanh Van, the Ho Chi Minh City-based head of the capital market division at the securities unit of Saigon Thuong Tin Commercial Joint-Stock Bank. “Bonds are a good investment” for them, she said. The yield on the benchmark note slipped 1 basis point to 8.57 percent, according to a daily fixing price from nine banks compiled by Bloomberg. It reached 8.53 percent on February 12, the lowest level since November 26, 2007. A basis point is 0.01 percentage point. Investors expect bond yields to drop to between 6 percent and 6.5 percent by the end of the year, Van said. Bonds have also advanced as the benchmark VN-Index of shares slumped 12.5 percent this year to the lowest since September 2005. Prudential Vietnam Fund Management Co. would increase its bond holdings should stocks decline further, Chief Executive Pham Ngoc Bich said Wednesday in HCMC, where his fund is based. Source: Bloomberg