Bonds complete a seventh monthly advance on rates

Five-year bonds completed a seventh month of gains as the central bank cut interest rates for the sixth time since October.

The State Bank of Vietnam reduced the benchmark rate on January 23 to 7% effective February 1, from 8.5%, to help stimulate demand in an economy that expanded last year at the slowest pace in almost a decade. Inflation that cooled to an almost one-year low allowed policy makers to slash borrowing costs.

The yield on the government five-year debt dropped 1.42 percentage points in January to 8.58 percent, near the lowest level since November 2007, according to a daily fixing price from 10 banks compiled by Bloomberg.

The local currency weakened Friday, falling 0.04 percent to VND17,483.50 against the dollar as of 3:08 p.m. in Hanoi, according to data compiled by Bloomberg. It ended 2008 at VND17,485.50.

The State Bank of Vietnam Friday set the reference rate for dong trading at VND16,975 a dollar, compared with VND16,973 on January 23, according to its website. The dong is allowed to trade at a limit of 3 percent higher or lower than that rate.

Financial markets were closed from January 26 through Thursday for Tet. (Bloomberg)