Report of SSI Retail Research about monetary market in April 2018 shows that in the first three months of 2018, the monetary and banking market inherited support factors since 2017 and maintained a very good status.
However, in April, the situation changed markedly with the liquidity of the banking system to be less abundant and interest rates started rising trend. The positive point was that exchange rate was relatively stable and decreased slightly compared to the previous month.
Specifically, after the State Bank consecutively issued T-bills in March and net withdrew 66 trillion dong in excess from the system, the liquidity of the banking system significantly decreased and was clearly reflected in open market transactions. The volume of newly issued bills strongly fell from 130 trillion dong to 68 trillion dong when the matured volume increased from 64 trillion dong to 126 trillion dong. Accordingly, about 59 trillion dong returned to the system. In spite of falling sharply, the volume of T-bills in circulation is still high with 67 trillion dong, which is a rather good buffet before banks borrow from OMO.
Increased demand for liquidity also pushed up interbank interest rates. Short-term interest rates such as overnight and one week exceeded one percent per annum, up about 70 basis points compared to the end of March to 1.44 percent/annum and 1.58 percent/annum respectively, while long terms had softer increase.
Bond yields also shifted to upward trend since the middle of April. Although inflation was still controlled well with CPI in April to increase 2.75 percent from the same period, market members expected that interest rates would increase, pushing bid winning ratio for government bonds to increase slightly in all terms with less than 10 basis points.
The secondary bond market also suffered from pressure, in which bond yields hit the bottom in the middle of April and rebounded quite sharply, and at the end of the month, it rose from 30 to 50 basis points compared to the bottom.
