Interbank Interest Rates in Vietnam Fall to 8-month Lows

Tuan Minh

12:39 18/07/2017

BizLIVE - Borrowing costs among banks in Vietnam have dropped to the lowest in eight months after a credit crunch at end-2016.

Interbank Interest Rates in Vietnam Fall to 8-month Lows

Interest rate for dong loans have touched 8-month lows. Photo: Internet

Interbank interest rates for dong-denominated loans in Vietnam last week for overnight, one-week and one-month terms decreased 47, 49 and 67 basis points (bps) to 1.28%, 1.57% and 2.42% per annum, respectively.
These are the lowest levels over the past eight months, according to SSI Research.
After the Vietnamese central bank cut policy rates by 25 bps at the start of last week, a series of local banks reduced lending rates for priority sectors by between 50 and 100 bps.
Deposit interest rates in the tie-1 market have fallen back after banks raised rates to meet adequacy ratios at the end of the second quarter. Deposit rates have slid 50 bps to around 4.5% per annum.
SSI researchers said that lower lending rates will weigh on bank’s profitability as they cannot slash deposit rates parallel in such a short period.
“Lower profitability will discourage commercial banks. This is a counterproductive effect from a right policy and needs fixing,” said SSI Research noted.
Rate cuts have pushed down rates on the government bond market. Winning rates of recent bond auctions dropped between 21 and 45 bps across all tenors.
Similarly, yields went down by 15 to 28 bps. Yields have dropped 80 to 160 bps from a year ago, according to the report.
Meanwhile, Vietnam’s credit default swap (CDS) decreased slightly after rising in the previous three weeks in a row.

 

TUAN MINH

Từ khóa: SSI