The monetary market report (May 13 to 17) of SSI Securities Corporation (SSI)’s Customer Advisory and Analysis Department said that last week, the State Bank of Vietnam (SBV) net withdrew 22.838 trillion dong via bonds when issuing 47.725 trillion dong of seven day tenor bonds but having only 25.887 trillion dong of bonds matured. The open market operations (OMO) channel net injected 98 billion dong.
Although SBV net withdrew a total of 22.74 trillion dong via OMO, the liquidity on the interbank was still quite abundant, the interest rate decreased by 30-40 basis points (bps) compared to the previous week, at 3.267 percent per year with overnight term and 3.33 percent per year with one week term. The difference between dong and US dollar interest rate decreased to 0.8 percent per year.
Deposit interest rates in the market one ranged from 4.1 percent to 5.5 percent for less than six months term, 5.5 percent to 7.5 percent for six to under 12 months term and 6.4 percent to eight percent per year for 12 month and 13 month term.
Savings channel continued to face strong competition from other investment channels, especially bond investment. The analysis of financial statements of 17 banks listed on three stock exchanges showed that total mobilisation (customer deposits and valuable papers issued) at March 31, 2019 was 5.178 quadrillion dong, up 3.1 percent from the beginning of the year and lower than the credit growth rate (3.4%). Excluding the decline in mobilisation and lending of Vietnam Joint Stock Commercial Bank of Industry and Trade (Vietinbank), deposit growth in Q1/2019 was only 3.7%, still lower than the credit growth rate of 4.4%.
Thus, from the same level of credit growth in Q1/2018, mobilisation was still declining in Q1/2019 although deposit rates were 0.5 percent to 0.7 percent higher than that of the same period in 2018. If this trend continued, in addition to the increasing demands of management agencies for capital and liquidity safety indicators, the mobilising interest rate would be difficult to reduce.
However, SSI’s analysis said that with credit growth targets this year at about 12 percent to 14%, credit growth in the next period might slow down; credit mobilisation might catch up and limite liquidity tension and interest pressure. In addition, domestic interest rates could also fall if Federal Reserve (FED) changed its policies. Currently, the probability that FED would reduce interest rates in December 2019 meeting had reached 76 percent due to the US-China trade tension. This expectation had caused United States 10-year bond yield to fall eight basis points (bps) to 2.39 percent per year.
