According to the weekly monetary market news from June 29 to July 3, released by SSI Securities Corporation (SSI), last week, the open market and the interbank market were still quite calm despite the vital time of closing the quarter. The State Bank of Vietnam (SBV) only net injected 1 billion dong through seven-day term purchases, with an interest rate of three percent per year. The interest rates went sideways on the interbank market, staying at 0.21 percent per year for the overnight term and 0.3 percent per year for the one-week term.
In contrast, in the market one (market of economic organisations and residents), commercial banks simultaneously reduced their deposit interest rates from 0.1 percentage points to 0.9 percentage points depending on the term starting from July 1, 2020. Leading banks were state-owned banks with a decrease of 0.25 percentage points to 0.3 percentage points for terms of less than six months and 0.5 percentage points for terms of six months or more. Some banks with larger reductions (0.5 percentage points to 0.9 percentage points) were Vietnam Technological and Commercial Joint-Stock Bank (Techcombank), Asia Commercial Joint Stock Bank (ACB), Tien Phong Commercial Joint Stock Bank (TPBank). Commercial banks often mobilised competitive interest rates, such as Vietnam Prosperity Joint-Stock Commercial Bank (VPBank), Saigon Hanoi Commercial Joint Stock Bank (SHB), HCM City Development Joint Stock Commercial Bank (HDBank), also decreased from 0.1 percentage points to 0.3 percentage points.
This was the strongest interest rate cut, continuing the decline from the end of 2019 to the present.
The current interest rate was at 3.5 percent to 4.25 percent for terms of less than six months, 4.4 percent to 6.7 percent for terms of six months to less than 12 months, from 5.5 percent to 7.5 percent per year with term of 12, 13 months. This interest rate was lower by 0.75 percent to 1 percent per year for terms of less than six months and 1 percent to 2 percent per year for terms of six months or more compared to the end of 2019.
In addition to the reduced impact of executive rates, according to SSI experts, deposit interest rates dropped sharply mainly due to weak credit output. Specifically, the credit growth as of June 29 was 3.26 percent compared to the end of 2019, despite an acceleration in June (up 1.28 percent compared to May) but still very low compared to 7,36 percent in the first six months of 2019. Deposit growth had been higher than credit, causing commercial banks to have excess domestic money and adjust to reduce deposit interest rates. After this reduction, it was likely that deposit interest rates would move sideways because of the following, according to SSI Experts. The reduction of deposit interest rates from 1 percent to 2 percent was nearly equal to the reduction of lending interest rates. Besides, the prospect of credit growth would improve because economic activities, trade were gradually recovering and investment disbursement. Also, the government had been promoted, balancing the factors of exchange rate and inflation.
The excess of input capital in the context of weak output credit had partly pushed capital flows into the government bond channel.
According to the SSI’s statistics, from the beginning of June until then, the State Treasury had continuously increased the bid volume. In the first bidding session of July, the State Treasury ordered 14.75 trillion dong, an increase of 23 percent compared to the last week of June and the most tender session in recent years. The demand from market members was also very large, the total number of registration was 3.6 times higher than the bid volume and the whole 14.25 trillion dong of 10-, 15 and 20-year terms that had been issued. Only 500 billion dong seven-year term had no successful bid. The coupon interest rate decreased at all terms.
Although the demand for issuance the State Treasury was expected to increase, the surplus of commercial banks made the demand for government bonds remain high and would keep government bond yields going sideways in the short term. In the long term, earnings movements would depend heavily on the speed of disbursement of public investment and credit growth of commercial banks, the report of SSI emphasized.
