Interbank interest rates surge in the week of December 12th to 16th

22-Dec-2016 Intellasia | NDH | 6:00 AM Print This Post

In the week of December 12th to 16th, the borrowing interest rates between banks exceeded the interest rates of market 1 on some terms, in which overnight rate significantly increased by 1.05 percent to 4.85 percent per annum. This is also the highest interbank interest rate in 214 days. In the last month, interbank interest rates have surged again.

Meanwhile, the mobilisation interest rates on market 1, according to the Retail Research of Saigon Securities Incorporation (SSI Retail Research), were raised from 5.5 percent to 5.7 percent per annum on three-month term, while that of one-month term remained the same at 5.3 percent per annum.

In the week of December 12th to December 16th 2016, the State Bank of Vietnam (SBV) lent out 35 trillion dong through the Open Market Operations (OMO), six times larger than what was recorded in the previous week. In this period, 2.5 trillion dong OMO matured and 13 trillion dong of bills were due. The total amount of capital injected by SBV for supporting liquidity was 45.5 trillion dong (24 trillion dong in the previous week). SSI Retail Research said that the entire volume of bills in circulation (worth 45.7 trillion dong) will mature in the week of December 19th to 23rd 2016.

On the primary bond market, the State Treasury has stopped issuing government bonds in this week. The Vietnam Development Bank (VDB) was the only offeror with the issuance of five-year and 10-year bonds but it was unsuccessful.

Similar gloomy development was seen on the secondary bond market. According to SSI Retail Research, the liquidity on the secondary bond market fell significantly due to seasonal factor. The repos trading dropped by 50 percent to 9.6 trillion dong, and outrights trading dropped by 15.4 percent to 19.1 trillion dong. Meanwhile, foreign investors net purchased 173 trillion dong of bonds at a fairly limited volume. The two-year and three-year government bonds were net purchased at a value of and 52 billion dong while 12-month bonds and 20-year bonds were net sold at respectively 107 billion dong and 51 billion dong. The bond yield continued to rise sharply, in which the two-year bond yield reached 4.993 percent.

Before and during the regular meeting of the US Federal Reserve (Fed), the US dollar index saw no major changes and it even decreased to its lowest point of the week on December 14th (99.8 points). After the meeting of Fed, the US dollar index rebound sharply. The peak was recorded in the afternoon of December 15th at 103.48 points, the highest level in 14 years. The strong increase of the US dollar is said to be caused by the statement of Fed’s Chairwoman Janet Yellen, which clearly mentioned that Fed may raise interest rates by three more times in 2017.

In the week of December 12th to 16th, the exchange rate developments in Vietnam were similar to what happened in the world. The US dollar remained relatively stable in the first three days of the week then surged in the last two days of the week. In these two days alone, SBV increased the reference exchange rate by 24 dong out of a total 27-dong increase in the whole week.

Meanwhile, on the free market, the exchange rate is approximately five percent different compared to the reference rate. From early November, the free exchange rate has risen by 4.1 percent while banks’ exchange rate has only increased by 1.9 percent.

The dong has constantly depreciated against the US dollar but appreciated against most of the currencies. In particular, the Japanese yen fell by an addition of 1.83 percent to 192.8 dong per Japanese yen, equivalent to just 3.13 percent increase compared to the beginning of the year. The euro depreciated by 0.41 percent against the previous week and by 2.5 percent compared to the beginning of the year. The Chinese yuan also dropped by 0.2 percent compared to the same period and by 5.2 percent from beginning of the year until now.


Category: Finance, Vietnam

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