Bonds, Dong Advance After S&P Says No Currency Crisis

Viet Nam's five-year bonds rose and the currency climbed after Standard & Poor's said ``extensive'' capital controls and the management of its currency will prevent overseas investors from fleeing the nation.

The central bank has increased borrowing costs three times this year to 14%, the highest in Asia, as the Southeast Asian nation seeks to tame inflation at the fastest since 1992.

``The bond demand is considerably high at the moment'' said Hanoi-based Pham Phuong Lan, head of fixed-income trading at the Bank for Investment & Development of Vietnam. ``There were many successful transactions today.''

The yield on the benchmark five-year note fell 101 basis points to 19% today, according to a daily fixing price from 10 banks compiled by Bloomberg. A basis point equals 0.01 percentage point.

The currency gained 0.02% to 16,616.5 per dollar as of 3:30 p.m. in Hanoi, according to data compiled by Bloomberg. The central bank lowered the dong by 2 percent on June 11 to prevent currency speculation.

``Vietnam is not in a currency crisis,'' Ping Chew, the Singapore-based head of Asian sovereign and corporate ratings at S&P in an interview on June 17. ``There's definitely a bit of hot money that went in. But is it going to leave en masse like that which decimated Asia in 1997? I don't think so.''

The State Bank of Vietnam set today's reference rate stronger at 16,454 a dollar, compared with the rate of 16,457 yesterday, according to its Web site. The currency is allowed to trade up to 1 percent on either side of the rate. (Bloomberg)