Experts say interest rates hard to fall

08-Nov-2018 Intellasia | Dau tu Chung khoan | 6:00 AM Print This Post

In October, dong interest rates rose on both Tier-1 and Tier-2 market. To meet high liquidity needs, SBV pumped 92.065 trillion dong into the market.

Analyst Team of SSI Retail Research, Saigon Securities Incorporation (SSI), has just released a report on the money market in October.

Experts says that the dong interest rate in the interbank market after a relatively stable period increased sharply to over 4.5 percent per annum (p.a.) for all tenors. Of which, the overnight rate rose the most, peaking at 4.533 percent p.a., up 193 basis points compared to the end of September and close to the current Open Market Operation (OMO) rate of 4.75 percent p.a. before falling back to 4.4 percent p.a. on the last day of the month. In that context, the stability of the US dollar interest rate made the interest rate spread between the US dollar and the dong to widen to 2.37 percent, partly supporting the stability of the exchange rate.

The interest rate in Tier-1 market has also been adjusted with increase in short tenors of one to three months at State-owned banks and long tenors of 12-13 months at large join stock commercial banks.

To meet the high liquidity needs of the banking system, the State Bank of Vietnam used OMO to lend out 44.544 trillion dong, the highest level in a month from the beginning of 2018 to the present and focused on the last week of October. With Treasury bills (T-bills), only 15.170 trillion dong was issued while 62.691 trillion dong was matured. For the whole month, SBV net injected 92.065 trillion dong, of which 44.544 trillion dong was bought through forward channel.

SSI Retail Research also said that for the first time since February 2018, the volume of OMO in circulation has exceeded the volume of treasury bills, marking the return of the pumping out period after a long period withdrawing a large volume of money via bills issuance.

Experts said that the high season at the end of the year accompanied with the need to protect the dong in the context of Chinese yuan continuing to depreciate make it difficult for interest rate in the coming months to reduce.

 


Category: Finance, Vietnam

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