Bonds decline as cash at banks drops; dong unchanged
The central bank on August10 reduced limits on how much funds banks can set aside for lending to 30 percent from 40 percent, causing yields to rise by the most in a month last week. Yields may climb further now that banks have increased deposit rates to boost liquidity, said Nguyen Thu Hong, head of the treasury department at Saigon Securities Inc. in Ho Chi Minh.
“The new 30 percent cap for banks to use their short-term funds to make on medium- and long-term loans, instead of 40 percent, has tightened money supply for investment in bonds,” said Hong.
The yield on the five-year notes rose 15 basis points to 9.96 percent, near the year’s high of 9.97 percent reached on August 18, according to a daily fixing price from about 10 banks compiled by Bloomberg. A basis point is 0.01 percentage point.
Vietnam’s State Treasury will sell US$100 million of dollar- denominated bonds Monday in the domestic market to raise funds for its economic stimulus spending.
The Ministry of Planning’s National Center for Socio- Economic Information and Forecast said it has proposed the central bank widen the daily trading band for the dong to 6 percent or 7 percent to boost the country’s exports. The currency is allowed to trade by as much as 5 percent on either side of the official rate that’s set each day.
The State Bank of Vietnam set the reference rate at 16,970 Monday, compared with 16,968 on August 21.
The currency traded unchanged at 17,816 per dollar as of 3:03 p.m. local time, according to data compiled by Bloomberg. It reached a record low of 17,862 on July 23.
