Interest rates appear to be falling

Martime Bank report notes movement in interbank lending and OMO indicate rates may be coming down.

Movements in the interbank market and open market operation (OMO) reflect expectations that interest rate will be cut shortly, according to Maritime Bank.

From June 16 to June 20 were some notable movements in the interbank market, with rates coming down. Rates on loans of less than one month fell by 0.9-1.8 percentage points, and overall the reduction on rates for lower terms was more substantial than those for longer terms.

The trend began in late April, bringing down average rates on VND in the interbank market to the lowest points for the last three years.

As interest rate fall, transactions in the interbank market were slower than previously. Transactions on OMO were also slow, as financial institution had less demand for borrowing via collateral.

The State Bank of Vietnam also net bought over the last five weeks via OMO, bringing the balance of collateral-backed lending activities to zero since May 18.
“Movements in the interbank market and OMO show that VND liquidity is positive and this is a consequence of government efforts to lower interest rates to boost the economy and this drives expectations about interest rates being cut in the time to come,” the Maritime Bank report stated.\


Similarly, in the government bond market the winning rate for three-year and five-year bonds also fell, with the former being at its lowest since December 14 and the latter being at its lowest since June 2015.

Moreover, the State Treasury is also increasing the volume of five-year bond being issued to meet increasing demand among financial institutions.

Source: Vietnam Economic Times.