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Interest rates in the money market continued sticking to their lows this week due to the minimal improvement in the first lending market. However, liquidity providers tend to less eager in selling funds at this price range, showed by raising overnight rate and lower traded value. This situation was attributable to the recent government’s urge to reduce bank lending rates. In the notable development, USDVND rose for the fifth consecutive week but corrected significantly after failing to break out 24,000 level, signaling a temporary pause in its upturn.

This week, the money market observed enduringly low interbank rates for the fifth straight week, with only slight gains seen in the banking system's lending activity. The SBV's continued to keep the OMO inactive for a second consecutive month, resulting from ample liquidity and the government's easing stances. The USDVND exchange rate faces upward strain due to heightened demand for carry trades, driven by prolonged USD-VND negative interest rate gap.

The super-low interest rate phenomenon in the money market endures for the third consecutive week when lending performance in the first market improved insignificantly. SBV held its OMO inactive for the second consecutive month under the liquidity excessiveness and the government’s preference for easing measures. On the FX market, USDVND continued facing upward pressure when the negative spread in interest rate between the dong and the greenback was mounting demand for the carry trade activities. However, the increase in the exchange rate was moderate under the strong supply stemming from trade surplus and FDI inflow.

Despite the pickup in June lending performance, the excessive liquidity in the banking system persists mainly due to the government’s urge for more dovish actions from SBV to bolster economic activities and the abnormal value of bond issuance from banks in recent weeks. Hence, the ON interbank rate hit its three-year low at 0.07%. At the same time, the bright U.S. inflation readings help alleviate the upward pressure on USDVND over the week. Overall, we expect a further dovish movement from SBV in the upcoming weeks to support economic growth when the slowdown in U.S. inflation becomes more visible.

The money market experienced significant fluctuations this week as several factors contributed to the volatility. The overnight interbank rate reached its lowest point in two years, while the widening interest rate gap between the US dollar and Vietnamese dong added pressure on the exchange rate. G-bond yields diverged between primary and secondary markets, and OMO remained inactive. Although credit growth showed positive momentum by the end of June, abundant liquidity persisted. Looking ahead, we anticipate further depreciation of the Vietnamese dong, adding challenges for Vietnam monetary authority to stimulate the economy.

The money market this week seems to neutralize the impact of SBV’s policy rate cut last week as interbank rates rebounded slightly and the dong regained its strength against the U.S. dollar. However, the G-bond yield recorded a fresh low possibly due to its alternative nature for sluggish lending activities. For the next week, GSO will unveil Vietnam’s economic situation through its June report. Hence, we predict the money market to be balanced heading to the next government's assessments and responses to the update of economic performance.

The development in the money market was mainly under the influence of SBV’s rate cut decision. Specifically, to improve economic performance, SBV, on Friday, extended the series of policy rate cuts for the fourth time this year, leading to notable reductions in various interest rates. The overnight interbank rate dropped below the 1% level for the first time since the pandemic, the 10-year G-bond yield recorded the most significant reduction in seven recent weeks, and USDVND climbed by 0.20% compared to last week. For the next week, we predict that the low-interest rate environment, especially for short-term tenors, will be preserved unless the economy records visible improvement.

The money market situation this week was mostly unchanged heading to June FOMC except for interbank rates, especially below 6-month tenors, sliding due to T-bill maturity. The G-bond yield was flat, and USDVND recorded a slight increase after four consecutive weeks of reduction. Looking ahead to next week, we predict that liquidity conditions will remain soft due to the insignificant change in lending activities, although there is no more T-bill maturity. Furthermore, it seems more likely that Fed will pause the rate hike in the upcoming June’s meeting, providing SBV more space to follow easing policies to promote economic growth in the future.

The money market this week features ample liquidity and cautiousness of participants. On one hand, massive T-bill maturity significantly softened liquidity condition, which was already excessive under the slowing lending activities, causing interbank rates to lower further. On the other hand, money market participants seemed cautious heading to June’s FOMC meeting, although the meeting could provide a milestone of Fed pivot. G-bond yield returned to the reduction, while USDVND rose slightly for the fourth consecutive week.

Liquidity condition in the money market remains ample under SBV’s effort to lower lending interest rates to facilitate domestic production. Money continues flowing into the banking system with a massive T-bill maturity without being rolled over. Thus, the interbank rate reduced across the curve this week. Turning into the FX market, USDVND increases further under the DXY resurgence. However, thanks to the steady trade surplus in recent months, we foretell the exchange rate to be stable despite the increasing possibility that Fed will provide a 25bps hike in the meeting two weeks later.