Interbank rates down to three-year lows
By Hong Phuc - The Saigon Times Daily
HCMC – Interest rates in the interbank market have dipped to the lowest levels in more than three years and local banks are facing excessive money supply on faltering credit demand.
Overnight interbank rates on Wednesday hovered in the range of 3-4% a year for one night to one-week terms, easing against previous days. Meanwhile, the rates for terms of two weeks to one month fluctuated between 4% and 7%.
Bank for Investment and Development of Vietnam (BIDV) said interest rates had slipped by 0.2 to 0.5 percentage points compared to the first two days of the week. This is the deepest fall of the interbank rates in three years.
During a bidding session on Wednesday, the central bank pumped VND487 billion into banks via the open market and at the same time withdrew VND423 billion. Also, the central bank issued more bonds worth VND3 trillion with coupons unchanged from the previous session, resulting in a net withdrawal of around VND2.94 trillion from the system via the open market.
“Liquidity in the monetary market has remained stable since early this week. Trading volumes are limited due to a widening gap between snowballing supply and slowing demand,” said a representative of BIDV.
State-owned commercial and foreign-invested banks have been active as the main capital suppliers in the interbank market, followed by a number of small medium-sized commercial banks. Meanwhile, small commercial banks and finance leasing companies have played a major role in borrowing interbank funds.
In the interbank market for foreign currencies, liquidity has remained stable with supply picking up and demand tumbling. Interest rates stayed at 0.5-1.2% yearly for terms of one night to one week, 1.2-2.2% for two weeks to one month and 2.2-2.7% for three months.
As for the bond market, liquidity on the secondary market is limited. Investors expect coupons would keep dropping while staying on the sidelines to see what will happen to a bond auction on the primary market at the weekend. The respective average coupons for bonds of one, two, three and five years were 9.3%, 9.35%, 9.45% and 9.52%.
The local foreign currency market has maintained strong liquidity but demand from corporate customers is quite meager in the context of increased supplies from firms and individuals, at over US$200 million, as reported by BIDV.
This shows that positive moves of the local market, along with the stability of the exchange rate, will continue. It is expected foreign currency holdings by the public will fall gradually for the rate on Wednesday was VND20,846-20,855 to the dollar.
Market observers said timely solutions were needed to prop up the struggling economy in which lender banks are sitting on increasingly large stacks of cash as companies are having little or no need to take out bank loans.