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The State Bank unexpectedly drew back the money

The State Bank unexpectedly drew back the money

Tuesday 21, 01 2020
The State Bank unexpectedly drew back money right in the peak days near the Lunar New Year.

The State Bank’s unexpected money deduction

After more than two months of suspension, today (January 20) the State Bank unexpectedly had a net transaction of withdrawing money via bidding on the open market (OMO).

​Specifically, the session today recorded that the State Bank issued treasury bills with a winning volume of nearly VND 5,000 billion.

This is the first time since the end of October and the beginning of November 2019, the operator has returned to withdraw money, after a part of changes from the change of the State Treasury deposit mechanism in early November 2019.

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On this return, SBV bills issued with a term of up to 91 days, which is very long compared to the main 7-day term used throughout 2019. This implies that the operator wants to gradually withdraw the money and thus the time when this source will return to the market when it expires.

On the other hand, with a large amount of foreign currency purchased in 2019, the supply of VND is plentiful and will definitely require neutralization through suction bills. In addition, usually after the peak of the Lunar New Year, the money quickly returns to the system and the State Bank often has to grant training to withdraw money soon after.

The potential effects

The State Bank unexpectedly drew back the money

Thus, this year, with the above signs, it can be considered that the State Bank is one step ahead. This is also tied to the situation that the operator is medium and continues to be net buyers of foreign currencies.

For many years, just around the Lunar New Year, the capital conversion from foreign currencies to VND to meet the peak demand for payment and payment is clearly shown. There have been years, during this period, associated with this conversion activity, the operator had to prevent the fall of the USD / VND exchange rate by raising or imposing the price to stop buying USD, due to the supply of USD sold for the large VND.

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This year, in association with the huge amount of foreign currency purchases in 2019, as well as the foreign currency conversion activity mentioned above Tet, the fact that the State Bank sucked back the money as above is surprising but suitable for the large supply of VND. This also reflects a difference compared to many years: the banking system has been more active in balancing the liquidity to meet the peak payment demand.

In this return, the State Bank's treasury bill interest rate stood at 2.8% / year, higher than the rate of 2.25% / year of October 2019. However, this interest rate is associated with the longer term than before, 91 days compared to 7 days.

​In the pump-out channel, as shown in the past three months, the State Bank is still ready to offer systematic liquidity support with a term of 14 days on OMO, but today no credit institution is using it.

Categories
Banking

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