Turnover in the interbank repo market last week dropped off by more than 10% last week as rates rose sharply at the short end of the curve, up more than 1.6% after the SBV lowered interest rates across the board.   The interbank loan market is a mess right now as the overnight rate is 0.84% higher than the 7 day rate and the 0.79% higher than the 14 day rate.  This suggests there is a lot of fear in the market and the twists in the interbank curve may be due to the inversion of the deposit curves with many banks offering higher rates up to a year than they are longer than that.  In effect market is not paying investors to lock up their money in the long term with a bulk of time deposits flooding the banks on 1 to 3 month turnover.  This inverted deposit curve is indicative of the banks taking the SBV at its word that they will continue to lower interest rates through 2012.

Deposits into HCMC banks are up 1.6% over February and nearly 15% over 2011 But the banks are still looking for liquidity where ever they can obtain it and deposit were a big source.   The interest rate differential between dollars and dong have seen deposits in dong rise to nearly 30% of the total, a 21% relative increase over last year and reflecting how effective the new regulations on the use of foreign currencies have been at removing dollars from circulation.  But, there is fear driving these markets right now.