Last week, the dong interest rates began to cool down on the interbank market along with the net withdrawal activities of the State Bank of Vietnam (SBV).
The latest update from the SBV showed that in the first half (H1) of 2019, credit grew by 7.33 percent from 6.22 percent as of June 18th 2019.
According to economist Can Van Luc, the strong rise of credit in the last two weeks of June was mainly due to seasonal factor. Usually, at the end of each quarter, particularly at the end of H1, businesses increase borrowings to finalise their business and production contracts.
This development is fairly in line with the SBV’s management of balances in the recent time when the system liquidity suddenly needed support and the dong interbank rates tended to increase fast.
Specifically, in the last week of June 2019, the SBV net injected nearly 47 trillion dong into the market through open market operations (OMO).
Notably, of this amount, 12 trillion dong were injected via mortgage channel with a term of seven days and interest rate of 4.75 percent. Meanwhile, for a long time in the past, the offering size was only maintained at one trillion dong and rarely used by credit institutions (CIs).
However, in the past week, after numerous strong increases, the dong interest rates on the interbank market have recorded adjustments.
Report from a market participant pointed out that in the first week of July 2019, the interbank rates simultaneously fell across the terms.
Closing the week on July 5th, the dong interbank rates were around 3.27 percent per annum on overnight term (down by 0.7 percentage point), 3.42 percent per annum on one-week term (down by 0.6 percentage point), 3.55 percent per annum on two-week term (down by 0.5 percentage point), and 3.73 percent per annum on one-month term (down by 0.5 percentage point).
The US dollar interbank rates saw less fluctuations. Closing the week on July 5th, the rates stood at 2.52 percent per annum on overnight term (unchanged), 2.56 percent per annum on one-week term (down by 0.03 percentage point), 2.65 percent per annum on two-week term (0.03 percentage point) and 2.77 percent per annum on one-month term (down by 0.03 percentage point).
In the same week, the SBV offered 35 trillion dong of bills, slightly up by two trillion dong compared to the week before. The term of the bills is still seven days, with interest rate of three percent per annum.
As a result, CIs absorbed all the offer volume. With 32.999 trillion dong of bills matured in the week, the value of bills in circulation reached 35 trillion dong.
No transaction was made on mortgage channel although the operator still regularly offered one trillion dong per session on a seven-day term and at interest rate of 4.75 percent per annum. In the week, 12 trillion dong were matured on this channel, bringing the volume of bills in circulation to zero.
Thus, in the week, the SBV slightly net withdrew 14 trillion dong from the market via OMO channel.
