Weighted average interest rates on customer deposits in Qatar at end-2020 fell by a range of 126-148 basis points (1.26% to 1.48%) across maturities from the corresponding levels of end-2019, according to QCB.
With the cuts in policy rates, particularly the QCB Deposit Rate (QCBDR) by 100 basis points (1%) during 2020, interest rates on customer deposits softened across maturities.
The decline in deposit rates was also transmitted to interest rates across credit facilities/maturities, although by a lesser extent, QCB said in its latest Financial Stability Report.
Thus, the weighted average rate across credit facilities declined by a range of 49-120 basis points (0.49% to 1.2%) at end-2020 from the corresponding levels at end-2019, the report noted.
According to QCB, movements in interest rates during 2020 continued to reflect the policy rate changes by QCB in alignment with the US Federal Reserve and the evolution of domestic liquidity conditions.
Interest rates in the money market declined significantly along with the large cuts in the QCBDR in March. Abundant supply of primary liquidity in the system also pushed down the money market interest rates.
In this regard, liquidity injection by QCB through special repo at zero rate played a role. The average overnight interbank rate (AOIR) fell along with the cuts in the QCBDR.
However, due to abundant primary liquidity mentioned above, AOIR remained significantly lower than the QCBDR from April onwards.
On the whole, the AOIR during 2020 averaged 0.62% and ranged between 0.10-2.01% as compared with an average
of 2.25% and a range of 1.94-2.47% during 2019.
Volatility in the AOIR during 2020 multiplied several folds from that of the previous year.
However, QCB noted this was “primarily a reflection” of the policy rate cut compounded by abundant liquidity that pushed down the AOIR far below the level that prevailed before the rate cuts in March.
Inter-bank rate across all maturities declined during 2020 along with the cuts in the QCBDR but was more pronounced for the overnight.
Thus, the range of 0.1% -2.75% during 2020 across different maturities was wider than the range of 1.94%-3.7% during
2019.
Cuts in policy rates and liquidity conditions that became highly easy from March 2020 also got reflected in the movement of T-bill yields of all maturities.
T-bill yields of all the three maturities dipped by more than half between February and March. Thereafter, as large surplus liquidity continued to prevail throughout the year, T-bill yields continued to soften across all maturities, before stabilising at a very low level in Q4-2020.
Overall, the T-bill yields across the three maturities declined from a range of 1.41%- 1.49% in January to a range of 0.07%-0.14% in December.
The Qatar interbank offered rate (QIBOR) was introduced in May 2012 with the purpose of providing an indicative role for banks in determining inter-bank rates.
Even though, the QIBOR and the average overnight inter-bank rates generally co-move in the same direction, the highly easy liquidity conditions led to divergence between the two during 2020.
While QIBOR continued to stay closer to the QCBDR, the average overnight inter-bank rate fell close to zero due to the easy liquidity conditions that prevailed.
“The strategy of QCB’s liquidity management operations continued to be ensuring a stable interest rate regime by guiding markets rates to the desired level so as to support a diversified economic growth,” the Financial Stability Review said.
With the cuts in policy rates, particularly the QCB Deposit Rate (QCBDR) by 100 basis points (1%) during 2020, interest rates on customer deposits softened across maturities.
The decline in deposit rates was also transmitted to interest rates across credit facilities/maturities, although by a lesser extent, QCB said in its latest Financial Stability Report.
Thus, the weighted average rate across credit facilities declined by a range of 49-120 basis points (0.49% to 1.2%) at end-2020 from the corresponding levels at end-2019, the report noted.
According to QCB, movements in interest rates during 2020 continued to reflect the policy rate changes by QCB in alignment with the US Federal Reserve and the evolution of domestic liquidity conditions.
Interest rates in the money market declined significantly along with the large cuts in the QCBDR in March. Abundant supply of primary liquidity in the system also pushed down the money market interest rates.
In this regard, liquidity injection by QCB through special repo at zero rate played a role. The average overnight interbank rate (AOIR) fell along with the cuts in the QCBDR.
However, due to abundant primary liquidity mentioned above, AOIR remained significantly lower than the QCBDR from April onwards.
On the whole, the AOIR during 2020 averaged 0.62% and ranged between 0.10-2.01% as compared with an average
of 2.25% and a range of 1.94-2.47% during 2019.
Volatility in the AOIR during 2020 multiplied several folds from that of the previous year.
However, QCB noted this was “primarily a reflection” of the policy rate cut compounded by abundant liquidity that pushed down the AOIR far below the level that prevailed before the rate cuts in March.
Inter-bank rate across all maturities declined during 2020 along with the cuts in the QCBDR but was more pronounced for the overnight.
Thus, the range of 0.1% -2.75% during 2020 across different maturities was wider than the range of 1.94%-3.7% during
2019.
Cuts in policy rates and liquidity conditions that became highly easy from March 2020 also got reflected in the movement of T-bill yields of all maturities.
T-bill yields of all the three maturities dipped by more than half between February and March. Thereafter, as large surplus liquidity continued to prevail throughout the year, T-bill yields continued to soften across all maturities, before stabilising at a very low level in Q4-2020.
Overall, the T-bill yields across the three maturities declined from a range of 1.41%- 1.49% in January to a range of 0.07%-0.14% in December.
The Qatar interbank offered rate (QIBOR) was introduced in May 2012 with the purpose of providing an indicative role for banks in determining inter-bank rates.
Even though, the QIBOR and the average overnight inter-bank rates generally co-move in the same direction, the highly easy liquidity conditions led to divergence between the two during 2020.
While QIBOR continued to stay closer to the QCBDR, the average overnight inter-bank rate fell close to zero due to the easy liquidity conditions that prevailed.
“The strategy of QCB’s liquidity management operations continued to be ensuring a stable interest rate regime by guiding markets rates to the desired level so as to support a diversified economic growth,” the Financial Stability Review said.
