According to the weekly money market report of SSI Securities Research and Advisory Division, released on Friday, July 19, the interest rate of treasury bills was adjusted down to 2.75 percent per year with seven-day term, down 25 bps (base point) compared to three percent per year that maintained from October 10, 2018.
In the last four months, bills were the main channel in the open market, lower interest rates encouraged market members to push money into the economy instead of transferring to SBV.
Last week, SBV net injected 19 trillion dong via Treasury bills so the interbank interest rates decreased continuously during the week, currently at 3.08 percent for overnight term and 3.18 percent for one week terms, down 10bps and 12bps respectively compared to the previous week. The difference between interest rates in dong and US dollar dropped to 0.6-0.7 percent per year.
Looking back from the end of 2015, although the US Federal Reserve (FED) continuously raised interest rates, SBV’s interest rate and Open Market Operation (OMO) interest rates remained stable, even during some period of time, the interest rates for OMO plummeted to below one percent annum. This shows that Vietnam’s monetary policy is quite flexible, with the aim of stabilising the currency and being cautious in regulating cash flow and controlling credit quality.
Therefore, according to analysts of SSI, if the Fed reduces interest rates at the end of this month as expected, it will not affect too much on the SBV’s monetary policy, but only make the implementation of favourable policy directions smoothier due to reducing pressure from exchange rates.
Some comments suggested that SBV had a move to loosen monetary policy when it just raised the credit limit for a series of banks. However, the analysis group said that this was SBV’s orientation from the beginning of the year, based on the actual credit growth in the first six months of 2019 for two reasons.
Firstly, the credit growth target of this year was 14 percent but the credit limit allocated to each bank was lower at the beginning of the year (11-13 percent), even growth of some banks such as CTG and STB was only seven percent. And secondly, if excluding Vietcombank, the commercial banks that met the Basel II had a total outstanding loan of about 1.1 quadrillion dong. If all eight commercial banks were raised their credit limit to the expected level, the increased debt balance compared to the old limit would have been about 46 trillion dong, equivalent to about 0.6 percent of the total debt balance of the whole system.
