Interbank rates forecast to inch down at end-Q2 2021
Interbank rates forecast to inch down at end-Q2 2021
After significant increases in the past few weeks, interbank interest rates are forecast to stabilise again in the second half of May and then decrease slightly at the end of the second quarter of 2021. 
From mid-April to the first half of May, interbank interest rates increased sharply, of which the rate for short-term dong loans jumped to more than 1 per cent per year, three times higher than that at the beginning of the year.
The size of loans among banks also increased dramatically. On average, in the first week of May, banks lent each other more than VND147 trillion each day, an increase of nearly VND15 trillion or 14 per cent per day compared to the previous week. Even compared with the same period last year, the average value per session doubled.
KB Securities Vietnam (KBSV) attributed the sharp increase in interbank interest rates to the widened gap between loans and deposits in the first four months of this year. Higher demand for loans created short-term pressure on the banking system’s liquidity in early May, KBSV explained.
However, KBSV’s experts said that the latest outbreak of the COVID-19 pandemic in Viet Nam would affect credit demand, causing it to decline. Therefore, interbank interest rates would gradually stabilise again.
Similarly, Viet Dragon Securities Company (VDSC) said although the liquidity of the banking system is less abundant than at the beginning of the year, it is still much better than before the pandemic. Therefore, the high interest rates are not worrisome at this time.
In recent transaction sessions, interbank interest rates have decreased slightly. Specifically, on May 18, the average interbank interest rate offered for dong loans decreased by 0.05 percentage points for the overnight term. On average, short-term interest rates are around 1.2 per cent for overnight loans, 1.31 per cent for one-week loans, 1.43 per cent for two-week loans and 1.49 per cent for one-month loans.
Besides the latest outbreak of the pandemic that makes it difficult for credit to increase, KBSV forecast new cash flow from the foreign currency trading channel would increase again from the end of June to the beginning of July. The flow would provide substantial liquidity to the banking system, it said.
These moves would cause interbank interest rates to cool down again in the second half of Q2 2021, KBSV said.
According to the Vietnam Interbank Market Research Association (VIRA), most of its members in May expected the one-week interbank interest rate would remain stable at 0.83 per cent per year on average in the next three months while some forecast the rate to drop to around 0.4 per cent.
