BSC surpasses business plan

It is forecast that interest rates will remain flat in the last 6 months of the year. The average overnight to 1 week term rate is around 0.6 - 0.8 percent. The VND interbank liquidity is supported by the cash flow of currency forward trading in the first 6 months which is expected to be a very large volume (about VND160 trillion, equivalent to USD7 billion). However, interest rates are unlikely to fall sharply as liquidity is unevenly distributed among credit institution groups. Meanwhile, capital mobilization and credit are expected to grow quite balancedly in the second half of the year, estimated at 5.5-6.5 percent.

GOVERNMENT BOND RATE DOwN TO RECORD LOw

The government bond interest rate in the secondary market fell sharply to a record low level in the first 6 months of the year. Particularly, the 10-year tenor interest rate dropped to about 2.2-2.5 percent/year. Investment demand remained positive in the context of low inflation pressure, high volume of maturing government bonds and expectation that regulator’s easing policy will not change. Meanwhile, the State Treasury’s issuance pressure in the primary market was not too great due to high State budget surplus. By the end of June 2021, the State budget surplus hit VND82 trillion (USD3.7 billion) – the highest ever since 2016.

In the second half of the year, the interest rate decline is expected to slow down. Instead, it will move sideways or slightly increase. There is not much room for interest rate decrease when compared with policy interest rates, VND interbank rates or inflation. In addition, interest rates are also under pressure to increase due to the State Treasury’s expectedly increasing issuance pressure as the State budget balance is less favorable in the second half of the year. However, the increase in interest rates is unlikely to be too high in the context of the SBV's easing monetary policy and improved VND interbank liquidity.