The SBV pumps nearly VND120 trillion into the market in the week of August 2nd-6th

13-Aug-2021 Intellasia | VnEconomy | 5:02 AM Print This Post

In the first week of August (from August 2nd to 6th), the State Bank of Vietnam (SBV) did not make any new transaction on the Open Market Operation (OMO). While the foreign currency buying forward contracts from the beginning of the year continued to be implemented, the supply of dong was improved.

Specifically, up to now, about 75 percent of the SBV’s foreign currency contracts have matured and the remaining volume will be fully implemented in August.

Previously, according to estimates of Saigon Securities Incorporation (SSI), at the beginning of the year, commercial banks sold nearly seven billion US dollars with a term of six months to the SBV at the selling price of 23,125 dong per US dollar.

Thus, with the completion of nearly 75 percent of the above foreign currency contracts, it is estimated that the SBV has injected about 118 trillion dong to the market through this channel. At the same time, about nearly 40 trillion dong will continue to be pumped out in the rest of August.

Thanks to the large additional source of capital, the system liquidity remained abundant, most clearly seen through the sideways movements of interbank interest rates at low levels in the week.

In addition, this trend continued until the session on August 9th when the average interbank interest rate in dong fell by 0.01 to 0.04 percentage point across the terms from one month or less, except for the two-week term of which the rate was unchanged. The interest rates in the week were 0.95 percent per annum on overnight term, 1.1 percent per annum on one-week term, 1.23 percent per annum on two-week term, and 1.39 percent per annum on one-month term.

According to the research team at SSI, despite the fact that the savings interest rates recorded a local uptrend in some banks, with increases ranging from 0.15 to 0.3 percentage point. The savings interest rate level remained at low level. In which, the interest rates were popular at three to four percent per annum on term of six months, 3.7 five percent per annum on term from six to less than 12 months, 4.2 6.5 percent per annum on term of 12 months or more.

In a related development, the market may soon receive a new amount of capital through repurchase of government bonds of the State Treasury.

This is a new “capital injection” channel of the Ministry of Finance of which the mechanism has been prepared and built since late 2020 but has only been implemented recently. It uses the temporarily idle funds of the State Treasury to termly buy government bonds. Through this method, credit institutions in the market, when in need of funds to balance their operations, can resell government bonds to the State Treasury.

In mid-July, the Hanoi Stock Exchange (HNX) and State Treasury jointly held the first auction. The winning value was 300 billion dong.

However, representative of the State Treasury said that in the third quarter of 2021 alone, the total limit for using temporarily idle state fund to termly buy government bonds is 54.760 trillion dong. During the implementation, the agency may adjust the volume of repurchase on different terms to suit the availability of the idle fund and market situation.

Regarding the trading sessions of the first week of August, the abundant market liquidity caused the government bond interest rates to fall on both primary and secondary markets. In particular, the Bank for Social Policies offered four trillion dong of bonds on terms of 10 and 15 years. In which, the 10-year bonds were fully purchased at interest rate of 2.47 percent per annum, unchanged compared to the previous session. In contrast, the 15-year bonds continued to have an unsuccessful auction although the lowest registered interest rate was revised down 0.06 percentage point.

Similarly, the State Treasury offered 8.5 trillion dong of bonds in the week. The winning rate was 86 percent and winning interest rates declined by 0.03 0.1 percentage point across all terms.

The government bond interest rates in the secondary market also fell by 0.02 0.17 percentage point across all terms, closing the week at 0.32 percent per annum on one-year term (down by 0.02 percentage point), 0.08 percent per annum on three-year term (down by 0.06 percentage point), 0.99 percent per annum on five-year term (down by 0.06 percentage point), 2.09 percent per annum on 10-year term (down by 0.1 percentage point), 2.29 percent per annum on 15-year term (down by 0.17 percentage point), 2.85 percent per annum on 20-year term (down by 0.1 percentage point) and 3.01 percent per annum on 30-year term (down by 0.06 percentage point).

 

Category: Finance, Vietnam

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