Added value supports system liquidity

07-Dec-2019 Intellasia | BizLIVE | 6:02 AM Print This Post

In the session on December 4th, the auctions on Open Market Operation (OMO) continued to record a prolonged support from the State Bank of Vietnam (SBV) with a fairly high offer volume of eight trillion dong.

This is the second consecutive week that the operator has increased the size of capital support to balance the system liquidity and ease interest rates in the interbank market.

In the December 4th session, four credit institutions (CIs) accessed this source with 5.896,6 trillion dong of loan matching. In general, the balance of the system via OMO reached 46.744 trillion dong.

Compared to the same periods of previous years, this number is fairly low. However, when it comes to the peak payment time in the end of the year, the injection through this channel and the balance are forecasted to increase high, such as reaching 150 trillion dong in 2018.

At the beginning of this net injecting period, the SBV strongly cut lending interest rates from 4.5 percent to four percent per annum. Recent sessions saw new added value. Specifically, the operator initially only supported on a short term of seven days, but the term has recently been extended to 14 days with unchanged interest rate of four percent per annum.

For banks, the longer term with unchanged interest rate is also considered an added value. Normally, the longer the term, the higher the interest rates, as shown in the interbank market and/or in market 1 (for residents and economic organisations).

In the previous peak seasons, this added value was likely to be added, because the SBV often extended the lending term through holidays, such as adding 28-day term but keeping interest rates unchanged.

On the interbank market, the dong interest rate tended to cool down on December 4th. The overnight rate fell to around four percent per annum. The overnight or one-week term rates on the interbank market are still higher than the four percent per annum of the SBV’s lending support on OMO. The reason is that when accessing capital through OMO, CIs need reciprocal valuable papers, or they have to bear higher interbank rates, such as 4.15 percent per annum on one-week term and 4.25 percent per annum on two-week term.

 


Category: Finance, Vietnam

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