HANOI, March 17 (Reuters) - Rising Vietnam bond prices drove yields to historic lows on Monday as banks reported strong liquidity while their costs for raising funds are set to fall after the central bank announced several key rate cuts, analysts said.
The yield on government bonds at one-year terms dropped to the lowest on record at 5.3250 percent, according to Reuters fixing data.
The two-year and three-year bond yields hits their record lows, at 5.8917 percent and 6.2167 percent respectively. Seven-year bond yield dropped 0.0521 points to 8.2417 percent, also a record low.
"Bond yields extended the falls amid strong liquidity in banks and difficulties in lending," said analyst Dau Thi Van Anh at Vietcombank Securities.
As of March 13, banks posted negative credit growth, with outstanding loans 1.03 percent lower than the end of 2013, while their deposits rose 1.92 percent in the same period, the central bank said on Monday, without giving any values.
"Credit institutions are reluctant to lend due to a lack of credible borrowers," said analyst Do Bao Ngoc at VPBank.
Vietnam's central bank said on Monday it would cut a series of key interest rates in a bid to boost the pace of economic expansion at a time inflation has been low.
Lower rates implied a stable macroeconomic outlook and would reduce the costs of raising funds at banks, Van Anh said.
Vietnam has raised a combined $2.87 billion worth of government and government-backed bonds since the beginning of this year, up 39 percent from the same time last year, according to data compiled by Reuters.
Fixings of Vietnamese bond yields are calculated daily by Reuters, using bid and ask yield rates contributed by both foreign and domestic banks prior to 0400 GMT. (Reporting by Mai Nguyen; Editing by Martin Petty)