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MONETARY MARKET UPDATE OTC 2025: INTEREST RATE AND EXCHANGE RATE UNDERCURRENTS

The SBV raised the lending scale in the open market operations (OMO) in October. Overall, the SBV did not significantly boost liquidity support for the banking system during the month. However, the pace of net injections tended to accelerate from mid-October, when interbank interest rates surpassed the 5.0% per annum threshold.
With the SBV’s cautious policy stance, we expect interbank rates to remain elevated in the final months of the year. At the same time, the upward trend in deposit rates at commercial banks is likely to become more evident as credit growth accelerates in the last quarter.
Given the current growth momentum and referencing historical credit patterns in the fourth quarter of previous years, total credit growth in 2025 is estimated at 19–20%, exceeding the SBV’s initial target of 16%.
Over the past month, several fragmented warnings from the authorities have been issued regarding the issuance and use of bond mobilization funds by credit institutions, tighter control over lending for real estate deposits under private agreements, and enhanced supervision to prevent arbitrage between official and unofficial exchange rates.
The record-high gap between the official and free-market exchange rates reflects, to some extent, limited USD supply both within and outside the banking system. In the short term, the SBV’s committed future foreign currency supply (around USD 4.4 billion) serves as a key anchor for the official exchange rate. Nonetheless, we believe that the abnormal spread between the two markets will not persist for long. Moreover, the free-market exchange rate movements may be pricing in expectations of VND depreciation pressure in 2026.