Central bank continues T-bill issuance to stabilise exchange rate
The State Bank of Vietnam (SBV) on October 9 continued to offer 28-day treasury bills (T-bills) through the interest rate auction mechanism.
Four out of 10 participants won the bid with the total amount of nearly VND5 trillion (US$204.89 million), and an interest rate of 1%, as compared with six winners and the interest rate of 1.18% in the October 3 auction.
Over the past 13 trading sessions, the central bank has net withdrawn some VND145.7 trillion from the banking system through the T-bill channel.
T-bills are short-term debt securities with maturities typically ranging from a few days to one year. Issued by the State Treasury, T-bills serve as a means for the Government to raise short-term funds to finance its operations.
According to economic experts, the central bank's continuous issuance of T-bills is aimed at adjusting the short-term liquidity in the banking system, thus stabilising the USD/VND exchange rate and addressing the issue of excess capital.
The BIDV Securities Joint Stock Company (BSC) said this is a common practice of the central bank to regulate the abundant liquidity in the interbank market.
Following the continuous issuance of T-bills by the SBV, the exchange rate has shown signs of cooling down. The bank set the daily reference exchange rate at VND24,069/USD on October 10, down VND5 from the last weekend.
With the current trading band of +/- 5%, the ceiling rate applicable for commercial banks during the day is VND25,272/USD and the floor rate VND22,865/USD.
