Weighted average interest rates on customer deposits, credit facilities fell in Qatar in 2020: QCB

Weighted average interest rates on customer deposits in Qatar at the end of 2020 have fallen within a range of 126 to 148 basis points (1.26% to 1.48%) on all maturities compared to corresponding levels at the end of 2019, according to QCB.
With the cuts in key rates, in particular the QCB deposit rate (QCBDR) of 100 basis points (1%) in 2020, interest rates on customer deposits have fallen on all maturities.
The drop in deposit rates has also impacted interest rates across all credit facilities / maturities, albeit to a lesser extent, the QCB said in its latest financial stability report.
Thus, the weighted average rate on credit facilities fell within a range of 49 to 120 basis points (0.49% to 1.2%) at the end of 2020 compared to the corresponding levels at the end of 2019, note The report.
According to QCB, interest rate movements in 2020 continued to reflect changes in key rates by QCB in line with the US Federal Reserve and changes in domestic liquidity conditions.
Money market interest rates have fallen considerably alongside the sharp declines in the QCBDR in March. An abundant supply of primary liquidity in the system also pushed down money market interest rates.
In this regard, the injection of liquidity by QCB via special zero-rate pensions played a role. The overnight average interbank rate (AOIR) fell in line with the QCBDR declines.
However, due to the abundant primary liquidity mentioned above, the AOIR remained significantly lower than the QCBDR from April.
Overall, AOIR in 2020 averaged 0.62% and ranged between 0.10 and 2.01% from an average
of 2.25% and a range of 1.94 to 2.47% in 2019.
The volatility of AOIR in 2020 has been multiplied by several compared to that of the previous year.
However, QCB noted that this was “mainly a reflection” of the decline in key rates, made worse by abundant liquidity which pushed AOIR down well below the level that prevailed before the rate cuts. March.
The interbank rate on all maturities fell in 2020 in line with the cuts in the QCBDR, but was more pronounced overnight.
Thus, the range of 0.1% to 2.75% in 2020 on different maturities was wider than the range of 1.94% to 3.7% during
2019.
The cuts in key rates and liquidity conditions which became very easy from March 2020 were also reflected in the evolution of yields on Treasury bills of all maturities.
Yields on three-maturity treasury bills fell by more than half between February and March. Subsequently, while large liquidity surpluses continued to prevail throughout the year, Treasury bill yields continued to depreciate across all maturities, before stabilizing at a very low level at the end of the year. Q4-2020.
Overall, Treasury bill yields across all three maturities fell from a range of 1.41% to 1.49% in January to a range of 0.07% to 0.14% in December.
The Qatar Interbank Offered Rate (QIBOR) was introduced in May 2012 with the aim of giving banks an indicative role in determining interbank rates.
Even though the QIBOR and average overnight interbank rates generally move in the same direction, the very easy liquidity conditions have led to a divergence between the two in 2020.
As the QIBOR continued to move closer to the QCBDR, the average overnight interbank rate fell close to zero due to the easy liquidity conditions that prevailed.
“QCB’s liquidity management operations strategy continued to ensure a stable interest rate regime by guiding market rates to the desired level in order to support diversified economic growth,” said the Financial Stability Review.


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