The Art of Monetary Flexibility: A Central Bank’s Masterstroke

Specifically, during the period from October 28 to November 4, the SBV lent commercial banks VND 64,000 billion through the 7-day term buying channel at an interest rate of 4%/year. Of which, the November 4 session had the highest value in more than 3 months, up to VND 30,000 billion.

On the contrary, the regulator issued bills worth VND 23,850 billion in 2 terms of 14 days (VND 15,600 billion) and 28 days (VND 8,250 billion). The winning interest rate for the 14-day term reached 3.7-3.75%/year and the 28-day term was fixed at 3.99%/year.

On the other hand, during the period from October 29 to November 4, the weekly pledge loan (October 22-28) matured, sucking VND 23,015 billion of liquidity out of the market. In addition, VND 4,400 billion and VND 3,900 billion worth of bills issued in the October 18 and October 21 sessions matured in the November 1 and November 4 sessions, respectively, so VND 8,300 billion was pumped back into the market.

Thus, the SBV net injected VND 25,435 billion of liquidity into the system through the open market operation channel. Of which, there were VND 54,000 billion circulating in the pledge channel and VND 82,500 billion worth of SBV bills circulating in the market.

According to SSI Research, the SBV flexibly combines both the term buying channel and the bill issuance channel in the open market operation channel to control liquidity in the system. In which, the end-of-month seasonal factor makes some commercial banks increase the use of the term buying channel.

After the SBV’s move, the overnight interbank interest rate jumped strongly in the first two days of the week (October 28-29) to 4.7%/year and cooled down towards the end of the week (November 1) to 3.9%, unchanged from the previous week. However, SSI experts forecast that in the week of November 4-8, liquidity pressure remains as the results of the US presidential election or the decision of the Federal Reserve (Fed) in the November meeting will affect exchange rate movements, and SBV interventions may affect market liquidity and interest rates. interbank market)

Khang Di

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