Overnight rate hits 11 per cent in early June

Overnight rate hits 11 per cent in early June

Interbank interest rates for Vietnamese đồng loans across most short-term maturities have surged sharply at the beginning of June amid increased short-term capital demand from the banking system.

Specifically, the overnight rate on June 1 surged to 11 per cent per year, four percentage points higher than at the end of last week.

Rates for two-week and one-month maturities also increased to 7.5 per cent per year and 7.75 per cent per year, respectively, while one-week maturity rates remained unchanged at 7.4 per cent per year.

Conversely, interbank interest rates for US dollar loans remained relatively stable. The overnight rate stayed at 3.65 per cent per year, while the one-week and two-week rates were 3.7 per cent and 3.75 per cent per year, respectively.

The one-month rate saw a slight increase to 3.81 per cent per year.

The surge has prompted the State Bank of Vietnam (SBV) to continue injecting over VNĐ13.6 trillion to support liquidity for commercial banks through the open market operation channel.

This is the second consecutive week that the SBV has maintained a net liquidity injection. Previously, the central bank provided a net support of over VNĐ30.7 trillion in the last week of May – the highest level in about a month.

According to analysts, increased liquidity pressure in the interbank market mainly stems from the faster recovery of credit demand, while capital mobilisation has not improved correspondingly.

Following a sharp decline at the beginning of the year, deposit interest rates have shown signs of stabilising, with some commercial banks even slightly increasing rates for medium and long-term maturities to attract deposits.

In this context, the SBV has repeatedly issued messages urging commercial banks to continue reducing costs and stabilising deposit and lending interest rates to support economic growth.

The central bank has also requested its branches nationwide to review commercial banks with significantly higher interest rates than the market average.

According to an assessment by Viet Dragon Securities Company (VDSC), there is limited room for further interest rate reductions in the short term, given the continued pressure on exchange rates and the lack of clear signals from the US Federal Reserve to lower interest rates.

VDSC believes that with the current VNĐ-USD interest rate differential, domestic interest rates are unlikely to fall further in the next three months. 

bizhub