Vietnam bonds up on banks' liquidity, low inflation

HANOI Tue Jan 21, 2014 3:39am EST

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HANOI Jan 21 (Reuters) - Vietnam bonds climbed on Tuesday, driving yields to their lowest in more than six months as demand for bonds increased on low inflation and solid liquidity in banks, analysts said.

The yield for government bonds on one-year terms fell 0.0917 point to 6.025 percent, the lowest since July 4, 2013, according to Reuters fixing data.

The three-year bond yield was down 0.0625 point to 7.1625 percent, also a low of more than half a year.

Inflation in January is expected to be low this month, analysts said. Vietcombank Securities estimated January's consumer price index to rise 0.9-1 percent from last month, or 5.7-5.8 percent yearly.

The central bank has been injecting money into the open market, keeping liquidity at a sufficient level prior to the Lunar New Year holiday, when cash is in high demand, said analyst Van Anh at Vietcombank Securities.

Liquidity would also be boosted later this month as 61.8 trillion dong ($2.9 billion) worth of bonds and bills reach their maturity dates, Van Anh said.

Credit lending tends to be low in the first quarter of the year, so banks would invest more in other markets, including bonds, said Nguyen Duy Phong at Viet Capital Securities.

The State Treasury and banks last week sold $405 million worth of bonds, or 94 percent of those on offer.

The Asian Development Bank in November said Vietnam was the fastest growing bond market in emerging East Asia, expanding 18.8 percent year on year at $25 billion. Government bonds grew 24.8 percent to $24 billion, it said in a report. ($1 = 21,060 dong) (Reporting by Mai Nguyen; Editing by Martin Petty)

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