Macro Report

Overnight rates moved above 1%. The SBV last week continued to at its discretion utilize OMO transactions in order to manage VND liquidity in the banking system, with several options of tenures for SBV treasury bills (mostly for 14 and 28 days). There was VND 12.4 tn worth of 14-day T-bills at 0.9% and VND 46.9 tn of 28-day T-bills at 1.5% newly issued, whereas VND 56.8 tn had expired. In total, the SBV net withdrew of 2.4 tn via this SBV bill issuance. On the other hand, reverse repos also have been utilized regularly, with an average of VND 200 bn issued every day. As a result of the continuous withdrawal via SBV bills, VND interbank rates rose to slightly above 1% for the overnight term. Rates posted at 1.05% (+12.4 bps) for the overnight term, and 1.65% (+13 bps) for the 1-week term. The spread between VND and USD overnight interbank rates narrowed to around -50 bps, from -60 to -70 bps during the week before.

The resumption of SBV Treasury bill issuance to deal with short-term abundant liquidity.

Spread between VND and VND interbank rates fell into negative territory since early June

Credit growth reached 16.7% YoY, and the extension of credit growth ceiling will expect to be discussed in mid-July. A cautious and not across-the-board limit increase is expected.

Deposit rates ticked up in some SoCBs, such as BIDV and Agribank. Pressure remains towards year-end.

The VND continued to depreciate in June. The SBV lifted the ask-rate at SBV exchange to VND 23,400 in early July.

Trading volume was active in the primary market, mostly due to the participation of insurance companies. Spread between primary and secondary remained large.

Bond yields in the secondary market were up and in line with global bond movements.

Credit growth surprisingly posted at 9.35% YTD. Last week, the SBV offered several maturities for treasury bills, ranging from 7 days to 28 days. In total, there were of VND 21.8 tn of 7-day T-bills at 0.65%, VND 78 tn of 14-day T-bills at 0.9% and VND 39.9 tn of 28-day T-bills at 1.5% newly issued, whereas VND 72.6 tn went expired.

VND interbank rates jumped post treasury bill issuance. Last week, the SBV continued to issue treasury bills, this time with longer tenure options. Specifically, there were a total of VND 72.6 tn of 7-day T-bills at 0.65% and VND 35 tn of 14-day T-bills at 0.9% newly issued, whereas VND 69.6 tn went expired. Within the week, reverse repos were also utilized, with VND 1.17 tn worth of 14-day bills at 2.5%. By the end of the week, outstanding bills jumped to VND 105.9 tn, and the SBV net withdrew VND 37.7 tn. Interbank rates rose as a result. Rates posted at 0.87% (+21.2 bps) for the overnight term, and 1.52% (+5.8 bps) for the 1-week term. Spread between overnight VND and USD interbank rates narrowed, though still in a negative range (-70 bps – as of July 1st).

Surprising actions from the SBV. Last week, the SBV surprised the market by resuming treasury bill issuance - marking the first move to do so since March 2020. Total amount to date reached VND 69.6 tn of 7-day T-bills, on the basis of an average annualized rate of 0.7% p.a. Additionally, rather than setting a fixed T-bill rate as before, banks are allowed to place bids. Therefore, the T-bill rate dropped to just 0.7% p.a. Earlier in the week, reverse repos were also utilized, with VND 530 tn worth of 14-day bills. Closing the week, outstanding bills dropped to VND 68.2 tn, which boosted interbank rates up a bit. Rates posted at 0.66% (+9.5 bps) for the overnight term and 1.46% (+12.5 bps) for the 1-week term.

Mixed movement within interbank rates. Last week, given stronger global USD strength, the SBV continued to sell 3-month USD forward contracts to cool down the market. However, OMO activities were still relatively inactive. Only VND 833 bn worth of 14-day reverse repo transactions at 2.5% p.a. were issued, and there was about VND 556 bn worth of bills that had expired. That led to total outstanding bills slightly up to VND 1.8 tn. Interbank rates continued to hover around the 0.5% range for the overnight rate but moved upward for the longer term, reflecting rising rate pressure. Closing the week, rates posted at 0.56% (+3.4 bps) for the overnight term and 1.34% (+13 bps) for the 1-week term.

Overnight rates hovered around 0.5%. Last week, the SBV continued to net withdraw of about VND 351 bn in circulation from the banking system. Specifically, VND 1.0 tn worth of 14-day reverse repo transactions at 2.5% p.a. were issued, and there was about VND 1.3 tn worth of bills that had expired. That led to total outstanding bills down further to VND 1.5 tn. Interbank rates moved sideways within the week. Closing the week, rates posted 0.53% (+2.9 bps) for the overnight term, and 1.2% (+1.9 bps) for the 1 week term.

Interbank interest rates dropped due to short-term abundant liquidity.

Credit growth at most banks reached the annual ceiling set by the SBV.

Deposit rates ticked up amongst the larger JSC banks, and was stable for others.

Guidelines for the interest subsidy program has been published; a 0.5% - 1% lending rate cut is expected for the 2022 -2023 period.

The VND continued to depreciate in May. The SBV provided 3-month USD forward contracts to support greenback liquidity.

Trading volume was active in the primary market, mostly due to the participation of insurance companies. Spread between primary and secondary remained large.

Bond yields in the secondary market were up, although at less of an incline than was previously.

Overnight rates slid further. Last week, OMO activities were relatively inactive. The SBV continued to net withdraw of about VND 400 bn out of the banking system. Specifically, VND 556 bn worth of 14-day reverse repo transactions at 2.5% p.a. were issued, and there was about VND 944 bn worth of bills that had expired. That led to total outstanding bills down further, to VND 1.9 tn. Interbank rates followed a downward trend within the week, closing the week with 0.5% (-60 bps) for the overnight term – the lowest since Apr last year and 1.2% (-32 bps) for 1-week term. 1-month and 3-month terms also declined to 2.3% (-26 bps) and 2.6% (-30 bps) respectively. Thus, longer term rates were hovering at a high level compared to last year’s range, still reflecting rising rate pressure.

The primary market remained active in 2021. There was VND 792 tn worth of corporate bonds issued in 2021, up 72% YoY.

In 1Q2022, new issuance of corporate bonds came to VND 61.9 tn (+34% YoY, but down -74% QoQ). The impact of recent scandals related to real estate bonds began to clearly manifest since the second half of Q1.

There were also a large level of early redemption for corporate bonds after some incidences of financial misconduct in the corporate bond market.

Public offerings were strongly promoted in Q1, with the lion’s share attributed to the banking sector. Issuance yields ranged from 7.4% - 11.5%.

The average term issued in 1Q2022 decreased sharply compared to 2021, mainly due to issuance structure (a larger proportion of real estate bonds). The real estate sector had tenure of less than three years, while the banking sector has the longest issuance term (5.4 years).

Corporate bonds of unlisted real estate companies accounted for a high proportion of issuance volume in 1Q2022 (more than 50%).

Overnight interbank rates slid to sub-1% range for the first time since last Dec. Last week, the SBV net withdrew about VND 400 bn from the banking system. Specifically, VND 1.4 tn worth of 14-day reverse repo transactions at 2.5% p.a. were issued, and there was about VND 1.8 tn worth of bills that had expired. That led to total outstanding bills down to VND 2.3 tn. The overnight interbank rate dropped significantly below 1% on the 26^th of May (the first time since last Dec) and then moved up marginally. Closing the week, rates posted at 1.1% (-76 bps) for the overnight term and 1.5% (-63 bps) for the 1-week term. For 1M and 3M terms on the other hand, these rose to 2.6% (+2 bps) and 2.9% (+8 bps) respectively, reflecting the ongoing pressure for rising rates expected over the next 3 months.

STV to purchase spot USD. Last week, the OMO activities were relatively balanced. SBV pumped VND 1.1 tn worth of 14-day reverse repo transactions at 2.5% p.a. into the banking system, whereas total bills expired reached VND 1.1 tn. Outstanding bills as of May 20^th were down slightly, to VND 2.7 tn. As a result, overnight interbank rates were well maintained within the sub 2% range. Closing the week, overnight interbank rates posted at 1.86% (unch WoW), and 1-week term was at 2.15% (-10 bps).

O/N interbank rates cooled down. Last week, the SBV net withdrew VND 2.7 tn out of the system (outstanding bills down to VND 2.9 tn) due to a large amount of bills having expired on Friday. Systemic liquidity remained healthy, and the overnight bank funding rate was well maintained within the sub 2% range. It slid to 1.85% (-13.7 bps WoW), and the 1-week term was at 2.25% (-17.1 bps) as of the 13^th of May. Longer term rates ranged from 2.4% to 2.9%, and the curve has moved back to its historical norm.

Overnight interbank rates cooled down. Last week, the SBV pumped only VND 1.1 tn worth of 14-day reverse repo transactions at 2.5% p.a into the banking system. Total bills expired in the week reached VND 1.7 tn, and the SBV net withdrew VND 621 bn (outstanding bills down to VND 5.4 tn). Liquidity conditions drove interbank rates back to the sub 2% range. Overnight rates slid to 1.99% (-31.3 bps WoW), while the 1-week term was at 2.4% (-21.2 bps) as of the 6th of May.