Peak season of interest rates has passed?

10-Jan-2019 Intellasia | Tri Thuc Tre | 6:00 AM Print This Post

Interbank interest rates have obviously decreased and interest rates in Tier-1 market have been temporarily stabilised in the first week of the new year 2019.

According to the updated report on money market of SSI Retail Research, in the first week of January 2019, the State Bank of Vietnam (SBV) net withdrew 24.768 trillion dong via Open Market Operation (OMO) channel, in which the amount pumped out (forward purchase) was 30.640 trillion dong and withdrawn (matured) was 55.408 trillion dong. Treasury bills (T-bills) continue to have no transaction and the balance of bills is currently maintained at zero. The forward interest rate on OMO was still 4.75 percent, the level that has been maintained for nearly a year.

On the interbank market, the interest rate after the close session of the year (on 28th December 2018) fell 15-20 basis points (bps) and moved parallel at 4.8 percent per annum (p.a.) for the overnight tenor, 4.85 percent p.a. for one week tenor. The interest rate in the Tier-1market was also stable when the peak season of mobilisation to meet the financial targets under BASEL II and Circular 16/2018/TT-NHNN has passed.

Recently, the Federal Reserve (FED) Chair Jerome Powell has stated that FED is aware of the risks and will be patient and flexible in policy decisions this year. He also remarked that basically the US economy is still well maintained based on two basic indicators of unemployment and inflation. According to the analysis group, this message has calmed down the concerns about slow growth of the US and helped the market expect a loosen schedule of interest rate hike, reducing pressure on the global interest rate level in the short term. However, in the long term, FED’s current interest rates are still quite low and will continue to be raised if the US unemployment rate remains at the current level.

In fact, in recent days, banks’ deposit rates have shown signs of temporary stabilisation after the large increase in December. However, instead of raising interest rates, banks increased promotions for depositors, such as gift giving, lucky draw, and extra-interest when depositing money.

Commenting on whether the interest rate has passed the peak season or not, the deputy general director of a large bank said that in general, on the system, it is not possible to confirm that it has passed the peak, since from now until Lunar New Year many banks need to have greater liquidity to serve the cash needs of the majority of people, and banks will also take this chance to attract deposit customers with their own promotion programmes. In order for the interest rate to cool down, according to him, it is necessary to wait until after the Lunar New Year occasion.

Earlier in the press conference to summarise banking activities in 2018 and orientation for 2019 took place on 7th January, when referring to the story of some banks raising interest rates recently, deputy Governor of the State Bank of Vietnam (SBV) said that interest rates are still stable, not too high. According to him, “the interest rates of many credit institutions have decreased in the beginning of the year and increased by the end of the year to ensure liquidity. Compared to the beginning of the year, the interest rate level is now nearly the same”.

SBV leaders also said that the SBV will closely monitor changes in the market and external impacts, especially the FED’s rate hike schedule to have appropriate operating policies for exchange rates and interest rates.


Category: Finance, Vietnam

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