Research Center

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.

The money market witnessed another uneventful week with minimal fluctuations in interbank rates, G-bond yields, and the USDVND exchange rate. Although this week marked the beginning of a wave of T-bill maturities, the overnight (ON) interbank rate experienced a slight decline. Banks tend to refrain from reinvesting the maturing T-bills, leading to soft liquidity pressure in the upcoming weeks. Turning to the FX market, the exchange rate remained steady, supported by a strong trade surplus despite a notable recovery in DXY. The stability in the FX market will provide SBV with room to implement future easing measures.

The liquidity condition generally improves after the holiday with lower interest rates for short-term loans and increased traded value, and G-bond yields tend to reduce for first and second markets. The development in the money market continues to reflect the government’s efforts in promoting credit activities to support domestic enterprises after the economy experienced a depressed performance in the first quarter. Furthermore, USDVND remains stable in the late phase of the Fed's rate hike, providing Vietnam’s monetary authority more confidence to follow easing decisions.

Vietnam's money market this week shows a modest but implicit move even just with two trading days. On one hand, interbank rates tend to increase when the liquidity condition seems to need more time to stabilize after a long holiday. On the other hand, USDVND is flat although one more 25bps increase in the Fed fund rate was released. Furthermore, the 10-year G-bond yield declined for the fourth consecutive week although. Therefore, we predict that participants might await more easing signals from the monetary authority after a depressed set of economic indicators for April.

High liquidity demand for a long holiday characterized this week while G-bond and FX markets witnessed slight moves. Interbank rates, especially for short-term tenors, increased significantly and with a 2.5 time-higher in trading value on Friday. In the opposite direction, FX and G-bond markets saw trivial changes with a 0.13% decrease in USDVND and a 7bps-decrease in 10-year G-bond heading to the May FOMC meeting. We expect the liquidity pressure to ease after the holiday and interbank rates to cool down next week.