Interbank interest rates hit record high of 17 per cent

Interbank interest rates hit record high of 17 per cent

According to data from the Vietnam Interbank Market Research Association, the average interest rate in the interbank market on February 3 increased sharply by 2-7.9 percentage points across most short terms under one month.

The central bank may soon intervene again to stabilise the market. — Photo cafef.vn

Interbank interest rates for the Vietnamese đồng have surged unexpectedly since early this week, with overnight rates jumping to a record 17 per cent as liquidity pressures intensified in the banking system.

According to data from the Vietnam Interbank Market Research Association, average interbank interest rates on February 3 rose sharply by between 2 and 7.9 percentage points across most short-term tenors of under one month.

The overnight rate, which accounts for the largest volume of interbank transactions, leapt from 7.9 per cent to 17 per cent per year. The one-week rate climbed from 5.4 per cent to 15 per cent per year, while the one-month rate increased from 7 per cent to 9.5 per cent per year.

Only the two-week rate remained unchanged at 6.4 per cent per year.

By contrast, average interbank interest rates for the US dollar edged up by just 0.01 to 0.04 percentage point across all tenors. Overnight to one-month dollar rates currently range from 3.6 to 3.8 per cent per annum.

On the open market operations channel, during the February 3 trading session, the State Bank of Vietnam (SBV) offered a total of VNĐ118 trillion (US$4.48 billion), including VNĐ60 trillion for seven-day terms, VNĐ37 trillion for 28-day terms and VNĐ21 trillion for 56-day terms, all at an interest rate of 4.5 per cent.

Nearly VNĐ80.93 trillion was successfully bid, comprising VNĐ40.73 trillion for seven-day terms, VNĐ24.58 trillion for 28-day terms and VNĐ15.61 trillion for 56-day terms.

On the same day, VNĐ15.87 trillion matured, resulting in a net injection of VNĐ65.05 trillion into the market by the SBV.

The amount of funds circulating through the collateralised lending channel has now reached around VNĐ441.28 trillion, the highest level on record.

Nguyễn Thế Minh, head of the Individual Customer Research and Development Division at Yuanta Securities Vietnam Company, attributed the sharp rise in interbank rates to mounting liquidity pressure following the Lunar New Year, driven by two main factors.

First, banks are entering a period of restructuring their loan portfolios, temporarily tightening liquidity within the banking system. When portfolio restructuring coincides with constrained liquidity, pressure can quickly push interbank interest rates higher, Minh explained.

Second, the period also coincides with the peak season for businesses to fulfil tax obligations, drawing a large volume of funds into State Treasury accounts.

Minh believes the SBV may soon step in again to stabilise the market, with refinancing seen as the most likely initial channel for injecting additional liquidity into the banking system. 

Bizhub