Interbank Interest Rates in Vietnam Surge amid Thinner Liquidity

Tuan Minh

16:18 17/11/2016

BizLIVE - Dong-denominated interest rates in the interbank market have risen rapidly as the year-end is nearing.

Interbank Interest Rates in Vietnam Surge amid Thinner Liquidity

Interest rates on dong loans are rising fast in Vietnam. Photo: Internet

Interest rates on dong-denominated loans in the interbank market have soared in recent days to five-month highs given stronger borrowing demand toward the year-end and thinner liquidity.
According to Maritime Bank’s Research Division, rates on November 15 increased between 18 and 25 basis points from a day earlier, with the rates for overnight, one-week, and two-week loans reaching 1.9%, 2.0% and 2.22% per annum, respectively.
These are the highest levels since June 2016, VnEconomy reported, citing a report by the Hanoi-based bank.
Liquidity in the banking system is no longer as profuse as a few months ago as enterprises are taking out more loans to prepare for the peak season in the final months of the year, ahead of the Lunar New Year festival which falls in end-January 2017.
The State Bank of Vietnam (SBV), the country’s central bank, has been scaling back the issuance of SBV bills as banks are now focusing on lending.
The volume of outstanding SBV bills dropped to 53.27 trillion dong ($2.38 billion) as of November 15, from nearly 90 trillion dong ($4 billion) in the July-September quarter. Rates of 14-day bills have risen to round 3% per annum after dipping to 0.35% a few weeks ago.
The Saigon Times quotes bankers as saying that the increase in interest rates will be short-lived because short-term credit growth usually gains momentum at the year-end.