However, the fact the country has been able to tap the markets with its second-ever dollar-denominated bond is part of a wider trend of increasing appetite for emerging market sovereign debt.

The Embi+, JPMorgan’s emerging market sovereign bond index, has seen spreads over US Treasuries, the international benchmark, narrow to 300 basis points, a 500bp fall since the start of the equity rally last March.

Hanoi had to pay higher rates than regional competitors Indonesia and the Philippines to sell $1bn in 10-year bonds. They sold with a yield of 6.95 per cent, at the stronger end of market predictions and 333 basis points above US Treasuries.

It is substantially more than the 228bp premium paid by Indonesia for its $2bn bonds or the 184bp premium paid by the Philippines for its $650m issue.

Vietnam posted gorss domectic product growth of 5.3 per cent last year and has targeted 6.5 per cent this year, but confidence has been hit by rising inflation, a widening trade deficit and persistent weakness of the dong.

“Vietnam has been associated in the past year with ... less prudent macro- economic policies than either Indonesia or the Philippines,” said Wellian Wiranto, an economist with HSBC in Singapore.

Hanoi is to use the money to fund energy and infrastructure projects.

Recent attempts to sell dong-denominated bonds into the local market have repeatedly fallen flat after the central bank declined to meet market expectations on yields. Vietnam has only once before issued dollar-denominated bonds. In 2005, it sold $750m worth of 10-year bonds which are currently yielding 327bp over comparable US Treasuries. The managers of the latest sale – Barclays Capital, Citigroup and Deutsche Bank – deferred pricing the bonds until Monday because of market turmoil over US bank restrictions.

Vietnam is rated BB with a negative outlook by Standard & Poor’s, one notch higher than both Indonesia and the Philippines.

By Tim Johnston - The Financial Times - January 26, 2010