The survey in the interbank market shows that liquidity in the second quarter tends to be more stable. Interest rate movements can be divided into two relatively clear periods: maintaining at a high level in the first half of the quarter, then cooling down and moving sideways in the second half. Specifically, in the first half of the second quarter, interest rates remained in the range of 3.84.5 percent per year with the overnight to one week terms, then decreased to 3.03.3 percent per year in the second half of the quarter.
The market tended to fluctuate more strongly in the last week of June when the overnight and one-week term interest rate approached the interest rates of Treasury bills (April and May) and Open Market Operation (OMO) (June). For the whole quarter, the one-week average interest rate was 3.61 percent per year, about 0.7 percent lower than the average level of the first quarter and about 1.42 percent higher than the same period of 2018.
Transactions in the market continued to be volatile compared to the same period of the previous years. The average trading value per session was about 50 trillion dong, equivalent to the average level in the first quarter. The trading volume continuously focused on the overnight and two week periods (accounting for about 92 percent of the total trading volume).
In June, the State Bank of Vietnam (SBV) net injected 63.8 trillion dong. In particular, the last week of the month was 47 trillion dong, with OMO reaching 12 trillion dong after nearly three months that OMO almost had no transactions.
For market I (mobilised from residents and economic organisations), a survey by Securities Investment Reporter showed that deposit rates remained stable at 4.15.5 percent per year with terms of less than six months, 5.57.45 percent per year with terms of six to under 12 months and 6.47.9 percent per year with terms of 12 and 13 months. In the month, some banks with small mobilisation market share raised the 1213 month term interest rates to eight percent per year. There were also some banks offering interest rates of 8.58.7 percent per year, but only for 2436 month deposit terms or with large deposits (500 billion dong).
Nguyen Quoc Hung, director of Department of Credit for Economic Sectors of SBV said, as of June 28, 2019, credit balance for the economy increased by 7.33 percent compared to the end of 2018, lower than the same period last year (7.86 percent). This was one of the factors identified by the market that had an impact on the stable trend of interest rates, because the difference in capital mobilisation and credit in the second quarter was maintained stable compared to the end of the first quarter when the mobilisation in dong grew at 7.1 percent and credit was not promoted.
The factors affecting the interbank market in the second quarter basically supported the stable trend of interest rates, which was recognised by a senior leader of Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV). Firstly, in general, SBV was still tightly and flexibly consistent with the direction of monetary policy since the beginning of the year to prioritise macroeconomic stability objectives.
Interest rates such as OMO or Treasury bills still remained steady and performed well in the orientation role for the market. In addition, the use of regular treasury bond issuance tools in the recent time with the issuance volume of about five to ten trillion dong per session in the short term of one to two weeks had shown the flexibility of SBV in controlling the money volume in the market at a reasonable level.
Secondly, with the difference between the capital mobilisation and credit maintained relatively stable in the second quarter, sudden changes in the amount of State Treasury deposits in commercial banks have had a more significant impact on the market liquidity in certain time.
In particular, at the end of April, the increase in the amount of money was relatively large (estimated at 30 trillion dong), causing the overnight to one-week interest rate to fall sharply below the issuance rate of Treasury bills and then continuing to remain low on the rest of the quarter.
SBV still maintains a prudent operating policy.
A study of BIDV’s Research, Capital Business and Currency Board forecasts that VND interbank market will continue its stable trend in the third quarter. The interest rate level is expected to be flat compared to the second quarter, staying in the range of three to four percent per year with the overnight and one week terms. The average interest rates in dong are expected to be around 3.03.5 percent per year for one week term and about 4.04.5 percent per year for three month term.
“The interbank market can continue to be peaceful when the impact factors will not have large fluctuations in the near future,” said the Research Team.
Talking to the reporters of Securities Investment Newspaper, Hoang Minh Hoan, deputy general director in charge of Financial Management Division and capital of Sai Gon Joint Stock Commercial Bank (SCB) said: “Basically, inflation is stable, system liquidity is abundant from the beginning of the year, the possibility of raising deposit rates will not be high, especially in the context of faster deposit growth than credit growth in the first six months.”
Nguyen Tri Hieu, an economic expert, said that while the inflation rate was maintained at an optimistic level in the first six months of this year, SBV would have a basis to consider partly easing the operating policy to support the economic growth.
“If this is done, it will be very cautious when the goal of macroeconomic stability is still a top priority. The credit growth and operating interest rates are likely to stay the same. The changes, if any, in the third quarter may be the regulation of money supply in the interbank market and the directional interest rate is adjusted to decrease slightly by 0.25 percent”, the Research Group wrote.
It is worth noting that the difference between capital mobilisation and credit is expected to be maintained or widened slightly to about 20,000-30,000 dong in the third quarter, because this is not a peak period in the context of SBV’s direction to reduce. Credit growth target is about 14 percent this year.
In addition, pressure to improve equity and restructure debt portfolio for commercial banks to meet the requirements of Circular 41/2016/ TT- SBV will take effect early next year, which can make credit activities not be promoted in the future.
Data from BIDV said, the disbursement of state budget was still quite bleak. Specifically, in the first six months, it only reached 36.8 percent of the year plan and increased 3.7 percent compared to the same period last year (respectively 35.5 percent and 9.5 percentin 2018), showing the amount of The State Treasury deposits at commercial banks from the beginning of the year had remained at a relatively high level compared to the same period of the previous years.
“It is expected that the State Treasury’s deposit in the third quarter may only slightly decrease by 10,000-20,000 dong without many positive signs for public investment activities in the near future”, the senior leader of BIDV said.
