Macro Report

Interbank rates cooled down though still remained at high levels. Last week, liquidity in the banking system seems to have improved, with only VND 522 bn worth of 14-day reverse repo transactions at 2.5% p.a utilized, mostly in the first half of the week. There was VND 1.1 tn in bills expired for the week, and total outstanding bills were VND 14.9 tn – which will most likely expire this week. Interbank rates therefore cooled down a bit, though rates were still at high levels. The overnight term rate recorded 2.71% p.a (-15 bps), while the 1-week term was 2.82% p.a, (-11 bps). Given that elevated credit demand is likely to persist, we expect that O/N interbank rates will stay around 1.5 - 2% p.a. Liquidity could be partly boosted via FX accumulation, when more inflows materialize via through the country’s trade balance surplus.

Interbank rates remained at high levels. On the first trading weeks after the Tet holiday, liquidity in the banking system was likely under constraint, while the OMO tap was used. The SBV pumped VND 14.4 tn into the system via 14-day reverse repo transactions, at 2.5% p.a. There was VND 8.8 tn in bills that had expired for the week, which led to total outstanding bills reaching VND 15.5 tn. Unlike last year’s Tet period in which the SBV only needed to provide 1-week of liquidity support, this year’s seasonal factor seems to have lasted longer, all the while during rising credit demand. Interbank rates therefore jumped significantly against a shortage in liquidity, though the curve flipped to normal with the overnight term at 2.85% p.a. (+52.3 bps) and 1-week term at 2.93% p.a. at +75.4 bps). For February, we expect that O/N interbank rates will stay around 1.5 - 2% p.a. under high credit demand. Liquidity could be partly boosted via FX accumulation, when more inflows materialize via through the country’s trade balance surplus.

Interbank interest rates increased on the back of liquidity shortage.

Credit demand surprisingly picked up in Jan, with a 16.62% increase in YoY terms.

The USD/VND exchange rate appreciated 0.6% YTD, diametrically opposite to the depreciation of other emerging market currencies in Asia.

Yields in the primary market were flat for most tenures. Trading volume was light, as expected for the new year. Systemic credit demand remains on the rise.

Bond yields in the secondary market were mixed. The yield curve has increasingly taken on a flatter form.

Interbank rates jumped under constraint liquidity pressure. On the last trading weeks before the Tet holiday, high cash demand prompted the SBV to pump VND 8.8 tn into the system via 14-day reverse repo transactions at 2.5% p.a. Total outstanding bills in the system reached VND 9.9 tn, and mostly will expire during this coming week. Interbank rates jumped significantly on the back of shortage in liquidity. Curve was inverted, as the overnight term reached 2.3% p.a. (+121 bps), higher than the 1-week term (at 2.2% p.a., +47 bps). 

Interbank rate gave mixed signals. Wrapping up 2021, the SBV net injected VND 10.54 tn, through a 14-day reverse repo at 2.5%. On the last day (31^st Dec), liquidity in the system was likely to face high pressure, and commercial banks had to utilize open market activities (of VND 9.98 tn). This is because supporting tools though the OMO rate was much higher than the interbank rates. For last week, interbank interest rates had mixed signals, up by 20 bps for the overnight term and down marginally for longer term, reflecting an imbalance in short-term supply-demand. Interbank rates closed the week at 1.57%/year (+20 bps WoW) for the overnight term; 1.76%/year (+7 bps) for the 1-week term, and 1.87% (-2 bps) for the 2-week term.

Mixed signals from interbank rates. There were no new transactions in terms of open market operations, and no outstanding bills left in the system at the end of the week. Interbank rates saw mixed signals, closing the week at 1.13%/year (-3 bps WoW) for the overnight term and 1.64%/year (+10 bps) for the 1-week term. For the coming weeks, liquidity in the system will be under pressure, as higher cash demand is expected towards Tet. Interbank rates therefore will face a relatively higher degree of volatility.  

Interbank rate cooled down. There were no new transactions in terms of open market operations or USD spot. At the end of the week, there were VND 10.54 tn worth of outstanding 14-day reverse repo in the system. Interbank interest rates cooled down after 2 weeks of increase. Interbank rates closed the week at 1.16%/year (-41 bps WoW) for the overnight term, and 1.55%/year (-20.8 bps) for the 1-week term.

Interbank interest rates increased on the back of liquidity shortage.

Credit demand picked up in Dec; 2021 credit growth therefore is expected to increase by 14% YoY.

The USD/VND exchange rate moved wildly in Dec; closed the year with an appreciation of 1.2% YTD.

Average winning yield up by 16 bps to 2.49% MoM, with an average term up to 17.8 years

Bond yields in the secondary market increased in line with regional movements.

Interbank rate gave mixed signals. Wrapping up 2021, the SBV net injected VND 10.54 tn, through a 14-day reverse repo at 2.5%. On the last day (31st Dec), liquidity in the system was likely to face high pressure, and commercial banks had to utilize open market activities (of VND 9.98 tn). This is because supporting tools though the OMO rate was much higher than the interbank rates. For last week, interbank interest rates had mixed signals, up by 20 bps for the overnight term and down marginally for longer term, reflecting an imbalance in short-term supply-demand. Interbank rates closed the week at 1.57%/year (+20 bps WoW) for the overnight term; 1.76%/year (+7 bps) for the 1-week term, and 1.87% (-2 bps) for the 2-week term.

Interbank interest rate jumped. The SBV net injected VND 2.04 bn through the 14-day reverse repo mechanism, at 2.5%. Open market activities have been reignited since this July, reflecting a temporary constraint of liquidity witnessed at year-end. For last week, interbank interest rates continued to jump by over +50 bps, closing the week at 1.37%/year (+51 bps WoW) for the overnight term, and 1.68%/year (+58 bps) for the 1-week term. Recently, the State Treasury (STV) has been actively purchasing USD at spot, which can partially improve liquidity in the banking system. Total FX purchases by the STV in Dec reached $900 mn, injecting about VND 20.4 tn into the system. Previously, in Nov and Oct together, this agency bought $400 mn USD from banks to finance its FX needs. 

Interbank interest rate jumped. There were no new transactions in terms of open market operations. FX liquidity status in commercial banks still remained in negative territory, thus no USD spot sales recorded last week. As expected, liquidity faced a temporary constraint at year-end and interbank rates inched up,especially for the longer term. For last week, interbank interest rates jumped by 15-47 bps, closing the week at 0.86%/year (+16 bps WoW) for the overnight term, 1.1%/year (+31 bps) for the 1-week term, and 1.7% (+47 bps) for the 1-month term.

Credit growth caps extended for banks. Last week, there were about VND 4.5 tn injected into the system via the FX forward sales scheme, and no sterilization actions have been seen from the SBV. Though there were no spot FX transactions seen last week, liquidity remained abundant and interbank interest rates were flat for the week, ending at 0.64%/year (-1 bps WoW) for the overnight term and 0.74%/year (-2 bps) for the 1-week term. Overall, for November, interbank rates moved sideways at an average of 0.67% for the overnight term, and down -20 bps MoM thanks to the excess amount of VND supply from USD sales transactions. The SBV has raised credit limits for fiscal year 2021 for many banks so far. Credit limits increased by 1-6%, depending on the quality of loan books and the safety indicators of each bank, which might be sufficient for credit growth to be in line with the pace of reopening. The target credit growth in 2021 is expected at around 13%. The SBV might also delay the current schedule determining the ratios for short term deposits vs. medium & long term loan for another year. While these ratios at domestic banks are still healthy, we believe that it might provide more of an incentive for banks to finance infrastructure projects that are on the national agenda (for example, some BOT projects connected with the North-South expressway). Overall, a low-rate environment will be reality for the remaining of the year. Deposit rates range from 3 – 4% for terms under 6 months, 3.7 – 5% for terms of 6 – 12 months, and 4.2 – 6.5% for term over 12 months, whereas lending rates vary from 5 – 7% for short-term loans and 9-11% for loans over 12 months.