Bank interest rates rise in peak season

23-Dec-2021 Intellasia | VnEconomy | 5:02 AM Print This Post

The movements in the capital market in the week of December 13th to December 17th showed that there were no new transactions in the Open Market Operations (OMO) and no spot foreign currency purchases. In the context when the market is entering the peak payment period at the end of the year, the market liquidity started to show signs of tension.

Accordingly, at the end of the week, the interbank interest rates sharply increased by 0.16 0.47 percentage point compared to the previous week, reaching 0.86 percent per annum on overnight term (up by 0.16 percentage point) and 1.1 percent per annum on one-week term (up by 0.31 percentage point).

The uptrend lasted until the first trading session of this week (December 20th). The increase was somewhat noticeable when the interest rate jumped to 1.15 percent per annum on overnight term and 1.35 percent per annum on one-week term.

Not only in market 2, the savings interest rates in market 1 also recorded similar fluctuations. Some small-scaled commercial banks slightly raised savings deposit rates for individual customers. The increase was from 0.1 to 0.3 percentage point, recorded in banks such as Orient Commercial Joint Stock Bank (OCB), Dong A Commercial Joint Stock Bank (DongABank) or Vietnam Thuong Tin Commercial Joint Stock Bank (VietBank), to attract idle cash flows from people in order to ensure lending activities as well as other needs of banks in the end of the year period.

Saigon Securities Incorporation (SSI) assessed that in addition to showing the usual seasonality, banks’ adjustments in savings interest rate are made in the context that the attractiveness of the savings channel has declined against other investment channels.

Currently, the mobilisation growth from the residential group tends to decrease sharply. The average growth rate is about four percent in 2021, down from the 7.5 percent recorded in 2020.

According to Pham Thanh Ha, deputy Governor of the State Bank of Vietnam (SBV), inflation is becoming a global concern, and central banks have begun to narrow down monetary easing measures. The SBV’s statistics pointed out that from the beginning of 2021 until now, there have been 93 interest rate hikes by central banks, in which 50 hikes have been made from September until now.

“The room for monetary policy is still very narrow. As the banking system mobilises capital from the economy and lends it back to the economy, interest rates will only be lowered to the levels which are enough to attract depositors. In the management of interest rates, the SBV will balance the relationship with inflation, and the interests of depositors,” said Ha.

Thus, it can be seen that savings interest rates have basically bottomed out. And the expectation of further reducing savings interest rates thereby lowering lending interest rates is very unlikely to continue.

In the government bond market, last week, the Vietnam Development Bank offered 2.5 trillion dong on terms of five, seven and 10 years. The winning bond yields significantly dropped by 0.15 percentage point on 10-year term. As a result, only 87 percent of the offer volume were successfully called.

The State Treasury offered 7.5 trillion dong of bonds, the lowest level in many weeks. The demand for five-year bonds was still low, while that for 10-year bonds remained high.

The winning bond yields on the primary market did not change much but slightly rose on the secondary market, closing the week at 0.57 percent per annum on one-year term (up by 0.05 percentage point), 0.68 percent per annum on three-year term (unchanged), 0.82 percent per annum on five-year term (up by 0.2 percentage point), 2.1 percent per annum on 10-year term (up by 0.01 percentage point), 2.36 percent per annum on 15-year term (up by 0.01 percentage point), 2.77 percent per annum on 20-year term (unchanged), and 2.97 percent per annum on 30-year term (up by 0.01 percentage point).

 

Category: Finance, Vietnam

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