The State Bank of Vietnam (SBV), the country’s central bank, has been issuing treasury bills to reduce excess liquidity in the system and is likely to continue to do so next week, said an analyst at leading broker SSI Securities.
The banking regulator withdrew a combined VND94 trillion ($3.87 billion) in seven consecutive days through Friday via T-bill issuances, according to SBV data.
Outstanding T-bills have hovered at around VND200 trillion ($8.23 billion) recently, meaning that the SBV will continue to auction bills in the coming days, said analyst Thai Viet Trinh.
The T-bills issued in recent days by the SBV may test the liquidity of the whole banking system to gauge proper interest rates in the tier-2 market (between banks and businesses/individual clients), and to avoid upward pressures on rates in the tier-1 (interbank) market, she added.
The SBV bought in around $6 billion in foreign currency in the first half of this year, injecting some VND130 trillion ($5.35 billion) into the system. The regulator is forecast to issue T-bills up to that amount and then assess further reactions, Trinh said.
The analyst commented that issuing T-bills is a better option than selling forex from the SBV’s reserves. This will help the bank regulate interest rates on the tier-2 market to ease pressure on the USD/VND rate and minimize collateral effects on tier-1 market rates.
Other experts share the view that issuing T-bills is a normal maneuver by central banks and does not mean a reversal of monetary policy. In the SBV’s case, it is aimed to curb the weakening of the Vietnamese dong against the U.S. dollar, which is standing by 10-month highs against a basket of major currencies.
Huynh Minh Tuan, CEO of FIDT Research, also forecast the SBV to continue its cash withdrawing streak until its USD/VND rate goal is met or liquidity reaches a certain level.
Speaking at a meeting of the National Assembly’s Economic Committee on Wednesday, SBV Deputy Governor Pham Thanh Ha said the banking regulator’s recent T-bill issuances were aimed at scaling back liquidity in excess while avoiding rate hikes. The bank will manage to balance the management of interest rates and the exchange rate.