Vietnam’s five-year bonds had their biggest weekly gain since May on speculation banks invested surplus cash in debt as lending slowed. The dong was steady.

Outstanding bank credit increased 2.77 percent this year through Oct. 19, trailing a 14 percent gain in deposits, online newswire VietnamPlus reported today, citing Nguyen Huu Nghia, chief inspector at the State Bank of Vietnam. Loans rose 14.4 percent last year, the government said in May. The overnight interbank deposit rate fell 70 basis points this week to 2.74 percent, the lowest level since Oct. 15, according to data compiled by Bloomberg.

“Liquidity is still good and the money-market rate has come down,” said Pham Phuong Lan, Hanoi-based head of fixed- income and currency trading at the Bank for Investment & Development of Vietnam. “That has increased demand for bonds.”

The yield on benchmark five-year bonds fell 16 basis points, or 0.16 percentage point, to 10.21 percent this week, according to a daily fixing rate from banks compiled by Bloomberg. That’s the first decline since the five-day period ended Aug. 17 and the biggest weekly drop since May 11. The yield fell three basis points from yesterday.

The dong traded at 20,848 per dollar as of 4:44 p.m. in Hanoi, compared with 20,851 yesterday and little changed from a week earlier, according to data compiled by Bloomberg.

The State Bank of Vietnam set its reference rate at 20,828, unchanged since Dec. 26, according to its website. The currency is allowed to trade up to 1 percent on either side of the rate.

Source: www.bloomberg.com