HCMC – Vietnam’s central bank net withdrew nearly VND39 trillion from the market and slashed interbank interest rates further as the banking system saw surplus liquidity due to slow credit growth.
The State Bank of Vietnam (SBV) sold seven-day and 28-day government bonds worth a combined VND20 trillion with a coupon rate of 5% per year by auction via open market operations (OMO) yesterday, May 11, but it saw no bidders.
More than VND11.9 trillion worth of government bonds fell due the same day, decreasing outstanding government bonds on OMO to over VND24.6 trillion. Outstanding treasury bills stayed at around VND110.7 trillion.
Since the start of the week, the SBV has net withdrawn over VND38.9 trillion via OMO.
As of late April, credit grew merely 3.05%, suggesting weak demand in the interbank and personal loan markets.
It then reduced interbank rates by 0.03-0.04 percentage point for tenors of less than one month. The overnight rate now stands at 4.78% per year.
Analysts predicted that interest rates would continue sliding in the next three years. According to Standard Chartered, the central bank may slash its refinancing rate by 50 basis points by the end of the second quarter to 5% yearly.
“If the Federal Reserve halts interest rate hikes at its meeting slated for June, the SBV may revise down its key interest rates by at least 50 basis points until late 2023,” said securities firm VNDirect.