The capital market report in the week of May 6th 10th 2019 recently updated by the analysis team of Saigon Securities Incorporation (SSI) showed that the State Bank of Vietnam (SBV) net injected 24.111 trillion dong via bill channel. Up to 50 trillion dong of bills matured but only 25.9 trillion dong were issued. The Open Market Operation (OMO) channel did not see any new transaction, while there were 515 billion dong of maturity, bringing the OMO balance to zero. Overall, the SBV net injected 23.596 trillion dong via the OMO.
The injection and withdrawal of money were carried out flexibly according to market supply and demand movements, helping the interbank rates almost level off, closing the week at 3.575 percent per annum on overnight term and 3.675 percent per annum on one-week term.
According to the analysis team, in the context of the rising exchange rate pressure from international developments, maintaining interbank interest rates to keep the dong US dollar interest rate difference at one to 1.5 percent per annum is an important factor to stabilise the foreign exchange market.
Regarding interest rates, the deposit rates on market 1 in the last week were maintained at 4.1 percent5.5 percent per annum on terms of less than six months, 5.5 percent7.5 percent per annum on terms from six months to less than 12 months, and 6.4 percenteight percent per annum on 12-month and 13-month terms.
SSI experts said that deposit rates will still be kept at the current levels because (1) the source for implementing credit growth targets will be ensured; (2) the boost of lending to individual customers at better interest rates will be the basis for commercial banks to maintain the current deposit rate level; (3) there is a need to increase mobilisation balance to meet the roadmap to continue reducing the ratio of short-term fund used for medium and long-term loans from 40 percent at present to 30 percent.
Although the US Federal Reserve (Fed) at the meeting in early May still affirmed to keep the interest rates unchanged in 2019, that is when all are optimistic about the prospect of the US China agreement. With recent escalation, the probability of a Fed rate cut has inched up to about eight percent for the June meeting and 40 percent for the September meeting (according to Bloomberg). However, SSI analysis team said that it is too early to predict but if the Fed changes interest rates, it will have a big impact on the global interest rates, including Vietnam.
