Vietnam to sell 300 bln dong bonds on June 27

HANOI, June 24 (Reuters) - Vietnam plans to raise 300 billion dong ($18.2 million) in a government bond auction this week to finance infrastructure projects after having failed to sell debt since late February partly due to market demand for high yields.

The State Treasury will sell the two-year bonds on Friday and issue the debt on July 1 which will mature on July 1, 2010, the Hanoi stock market said in a statement on Tuesday.

The proceeds will fund major infrastructure projects such as roads, bridges and ports.

The government failed for the seventh time in a row since late February to sell any debt when it sought to raise 500 billion dong worth of two- and three-year bonds on June 13.

Its last successful auction was on Feb. 28 when it raised 700 billion dong worth of two-year debt at an annual yield of 7.68 percent.

State-run Vietnam Development Bank also failed in its auction on June 18 to sell 700 billion dong worth of bonds as no bidders turned up for the sales of its two-year debt while some sought yields of as high as 14 percent for the 15-year bonds.

Banks, frequent buyers of government bonds, have been competing to raise dong funds as the central bank tightened monetary conditions to rein in inflation and overheating.

The central bank has raised interest rates and ordered banks to buy debt to rein in inflation at 25.2 percent in May.

Prime Minister Nguyen Tan Dung said last week Vietnam would further cut money supply to banks to help curb inflation. The central bank planned to cap Vietnam's credit growth this year at 30 percent after a surge of 54 percent in 2007.

Ratings agencies have downgraded their outlook on Vietnam's sovereign ratings to negative noting that economic imbalances were greater than anticipated and policies had not dealt quickly or strongly enough with inflation. ($1=16,451 dong) (Reporting by Ho Binh Minh, Editing by Jacqueline Wong)