Whereas it was reported last last week that the State Bank of Vietnam had issued US$411 million in treasury bills, it turns out this was the final of three bill issuances last week collectively totalling just shy of VND 30,000 trillion (US$1.2 billion), Doanh Nhan Vietnam is reporting. This should help to increase interbank exchange rates and reduce pressure on the local currency, the article quotes Bau Ngoc Tran, CEO of Wigroup, a financial data and market research firm, as saying. Bau goes on to predict that using treasury bills to stabilise the Vietnamese dong may go on until the end of the year.
Why it matters: Issuing bonds may stabilise the currency but it also puts upwards pressure on interest rates. Higher interest rates are likely to drive businesses and individuals to borrow less and could see consumers return to saving rather than spending.This could be a part of the reason why the VN-Index took a huge hit at the beginning of the week.