Headquarters of the State Bank of Vietnam (SBV). The SBV ceased bill issue in the context that interbank interest rates have rebounded from the lowest level. — Photo sbv.gov.vn

The State Bank of Việt Nam (SBV) has ceased bill issue after nearly two months of using the channel to withdraw cash out of the banking system.

Last Thursday, VNĐ20 trillion of bills came to maturity, but the SBV did not issue new bills for the first time after seven consecutive weeks of using the channel. It meant a corresponding amount of money was pumped back into the banking system.

On the day, though the SBV continued to offer to buy valuable papers with a seven-day term, no banks participated in the auction.

Previously, in the context of a liquidity surplus in the banking system and the lowest interest rate in the interbank market since the beginning of 2021, the SBV reopened the bill channel to withdraw cash out of the banking system on September 21 after more than six months of ceasing the channel.

According to analysts, the SBV's bill issue move was aimed to adjust liquidity in the banking system in the short term, which is expected to push up Vietnamese đồng-denominated interest rates in the interbank market with an aim to reduce the interest rate gap between the US dollar and the đồng to indirectly support the foreign exchange rate.

SBV’s statistics showed from September 21 to November 8, 2023, the SBV issued a total of nearly VNĐ360.35 trillion in bills, with a term of 28 days. By November 9, 2023, bills worth VNĐ185.69 trillion came to maturity so the cash returned to the banking system. Bills worth VNĐ174.65 trillion are under circulation and will mature in the near future.

The SBV ceased bill issue in the context that interbank interest rates have rebounded from the lowest level.

According to the SBV’s data, the average overnight interbank interest rate of đồng-denominated deposits on November 8 was 0.83 per cent per year, a sharp increase compared to the 0.14 per cent interest rate applied on September 21 when the SBV reopened the bill issue channel to withdraw cash out of the banking system. The interest rates for one-, two- weeks, and one month also increased by 0.3-1 percentage point.

In addition to the increasing trend of interbank interest rates, the US Federal Reserve (Fed)'s decision to keep interest rates unchanged in the last November meeting caused the value of the greenback in the international market to reverse and decrease sharply, which helped reduce pressure on the domestic foreign exchange rate.

In fact, the USD/VNĐ exchange rate has also decreased continuously in recent days. On November 9, 2023, the greenback selling price at Vietcombank - the bank with the largest foreign currency transaction scale in the banking system - was listed at VNĐ24,250 per dollar, down 0.9 per cent against the previous week. — VNS​