According to the report on currency market of the week from May 21st to 25th of Saigon Securities Incorporation (SSI), in the last week, the Open Market Operation (OMO) slowed down as no new OMO or bills was issued. In contrast, with 1.7 trillion dong of bills matured, about 1.7 trillion dong net were injected to the system.
An indication for the less abundant liquidity of banks was the developments on interbank market. In the last week, the interbank rates did not keep the downturn in the previous week and quickly increased again. Stronger increase was found in short terms.
Specifically, the overnight rate increased by 0.34 percentage point to 1.41 percent, while one-week and one-month terms increased by respectively 0.33 and 0.19 percentage point to respectively 1.5 percent and 1.79 percent per annum.
Regarding the bond issuance, during the week, the State Treasury still offered five-year, 10-year, 15-year, and 20-year bonds. However, the demand for bonds declined with total registration value only reaching 12 trillion dong.
The winning value significantly dropped compared to the previous session, in which the issuance of five-year, 10-year and 15-year respectively reached 215, 700 and 700 billion dong, equivalent to a total value of 1.625 trillion dong, down by 60 percent and only accounted for 27 percent of the total offer value.
The winning bond yield on five-year tenor remained unchanged at 3 percent, while the 10-year and 15-year bond yields slightly increased by 0.02-0.03 percentage point. The yields of these two tenors were most actively raised by the State Treasury, with a rise of more than 0.2 percentage point since March. Thus, these two tenors account for a large proportion (51 percent) of the government bonds issued this year.
On the international market, the bond yield of the US Treasury sharply declined in the last week. The 10-year bond yield fell from the peak of 3.11 percent to 2.93 percent in the end of the week. The unexpected reversal of the bond yields reflected market expectations after the minutes of the US Federal Reserve’s meeting.
In this meeting minutes, the Fed implied that the agency may let the inflation to go over 2 percent while the economy is still recovering, helping to ease investors’ anxiety as inflation approaches 2 percent with the concern that the Fed may accelerate the interest rate hike.
Although the rate forecasting that the Fed will raise interest rates on June 13th fell from 95 percent to 88.8 percent but is still a very high level. The rate forecasting that the Fed will raise interest rates four times in 2018 also dropped from 45 percent to 32.8 percent and the scenario that the Fed will make three interest rate hikes regained the highest rate.
Despite the sharp fall of bond yields, the USD value still followed an uptrend. The USD Index increased by 0.66 percent in the week to 94.25 points, the highest level in six months. Other European currencies such as euro, GBP and CHF both depreciated against the USD while Asian currencies including JPY and KRW tended to rebound.
The domestic market does not seem to have responded to the fluctuations in the world. The USD/VND exchange rate just increased slightly by five dong on the banking market, being traded at 22,745/22,815 dong per USD, and fell by 20 dong to 22,820/22,830 dong per USD on the free market. From the beginning of the year, the USD/VND exchange rate has only increased by 0.4 percent, while the USD Index has increased by 6.4 percent from the bottom level.
