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Bonds decline on improving growth outlook   2009-05-30 - Bloomberg

Bonds decline on improving growth outlook
Five-year bonds declined this week on speculation an economic recovery and a stock rebound will prompt investors to shun debt and seek higher yielding assets. The dong was little changed.


The VN-Index of shares, Asia’s worst performer in 2008, may become one of the region’s biggest gainers, Kim Eng Vietnam Securities said this week. The nation’s economic indicators are improving and growth is likely to accelerate in the second quarter, PXP Vietnam Asset Management’s Chief Executive Kevin Snowball wrote in a research report earlier this week.

“Investors, especially offshore investment funds are speeding up selling bonds this week to restructure their investment portfolio by shifting to equities,” said Vu Anh Duc, a bond dealer at Hanoi-based Vietnam Bank for Industry and Trade, known as VietinBank.

The yield on the five-year note gained 0.3 percent this week to 9.17 percent, according to a daily fixing price from 10 banks compiled by Bloomberg. It reached 20.53 percent in June last year, before the central bank in October began a round of interest-rate cuts that halved its key rate to 7 percent.

The benchmark stock index has rallied 75 percent since February 24 as policy makers spend around US$8 billion in stimulus to reverse a slowdown in the economy. The government last week said it plans to target an expansion of 5 percent this year, lower than an earlier estimate of 6.5 percent.

Sale fails

“The economy is expected to expand more than 3.8 percent in the second quarter and that recovery will discourage people from buying fixed-income securities,” Duc said.

Vietnam Development Bank failed to sell VND500 billion ($28 million) worth of bonds at a planned auction of 10-year notes Friday as investors demanded higher interest than the government was willing to offer, the Hanoi Securities Trading Center said on its website.

The dong traded little changed at VND17,785 to the dollar in Hanoi Friday, against VND17,786 Thursday and VND17,782 at the end of last week.

The State Bank of Vietnam set the reference rate at VND16,938 per dollar Friday, compared with VND16,939 Thursday, according to its website. The currency is allowed to trade up to 5 percent on either side of the official rate.

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