It raised $1bn in 10-year bonds priced with a yield of 6.95 per cent, 3.33 percentage points above US Treasuries. It was substantially more than the 2.28 percentage points premium paid by Indonesia for its $2bn bonds or the 1.84 percentage points paid by the Philippines for its $650m issue.

Vietnam posted gross domestic product growth of 5.3 per cent last year and has targeted 6.5 per cent in growth this year, but investor 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 high inflation and less prudent macro-economic policies than either Indonesia or the Philippines,” said Wellian Wiranto, a regional economist with HSBC in Singapore.

Hanoi will 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 last sold dollar-denominated bonds in 2005 when it raised $750m from 10-year bonds which are currently yielding 3.27 percentage points over US Treasuries.

The managers of the latest sale – Barclays Capital, Citigroup and Deutsche Bank – had hoped to price the bonds last Friday, but deferred the decision to Monday New York time after US president Barack Obama unsettled the markets with plans to overhaul the US banking industry.

Vietnam is rated “BB” with a negative outlook by Standard & Poors, one notch higher than both Indonesia and the Philippines. Fitch Ratings gives it a “BB-” rating and Moody’s is at “Ba3”.

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