Why Has the State Bank Temporarily Halted Bill Issuance and Shifted to Injecting Liquidity via the OMO Channel?

 Not only did it stop attracting money through bills, the State Bank also lent a member nearly 6,000 billion VND through the OMO channel in the April 2 session.

The April 2 trading session recorded notable developments when the State Bank (SBV) stopped issuing bills. At the same time, the valuable paper mortgage lending channel (OMO) also generated a new transaction when a market member "hotly borrowed" the State Bank of VND 5,952 billion with a term of 7 days, interest rate of 4%/year.


Thus, after 16 consecutive sessions of issuing bills to attract a total of nearly 171,700 billion VND, the State Bank has switched to a state of net injection of liquidity to the banking system. At the same time, this is also the first trading session since the end of February, the banking system needs support from the Operator.


The above move took place in the context of interbank interest rates suddenly skyrocketing in the two trading sessions of March 29 and April 1.


According to the latest data published by the State Bank, the average interbank VND interest rate at the overnight term (the main term accounts for about 90% of the transaction value) in the April 1 session increased to 3.45% - a level highest in more than 1 month. Previously, the interbank overnight interest rate in the March 29 session increased nearly 8 times, from 0.31% recorded in the previous session to 2.51%.



Besides the overnight term, interest rates of other key terms also increased sharply after only 2 sessions: 1-week term increased from 1.70% to 3.78%; 2-week term increased from 1.97% to 3.52%; 1 month term increased from 3.16% to 3.66%.


Not only shown through developments in interbank interest rates, the system's liquidity also showed signs of tightening when in the last trading sessions of March, the number of members participating in bidding for SBV bills as well as the block The number of winning bills has decreased sharply even though the winning interest rate has been raised to around 2%/year.


According to analysts, the fact that banks are not interested in the SBV's treasury bill bidding activity shows that the liquidity surplus seems to have decreased significantly after more than a dozen consecutive sessions of withdrawing money. However, the above trend also partly comes from seasonal factors, when banks balance their liquidity at the end of the first quarter.


In fact, the latest data published by the State Bank shows that, as of March 25, 2024, economic credit increased by 0.26% compared to the end of 2023 (March alone increased by 0.98%) after 2 years. consecutive months remained at negative levels.


In addition, the last two trading weeks of March saw a notable development in the deposit mobilization market when more banks increased deposit interest rates, including large private banks. such as VPBank, SHB, Eximbank.


On the other hand, from the beginning of next week (April 8), the first batch of 28-day T-bills issued in the past batch will begin to mature, meaning that the State Bank will pump back to the banking system a large amount of absorbed liquidity. returned from mid-March. 


This development, along with the OMO lending channel that has always been maintained by the State Bank, will help system liquidity not be too tight and interbank interest rates will likely cool down soon when in a high period. The end of the first quarter passes.

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