China and Singapore Jingwei client on March 9 The central bank announced that the current total liquidity of the banking system is at a reasonable and sufficient level, and no reverse repurchase operation will be carried out on March 9, 2020. So far, the central bank has suspended reverse repurchase operations for 15 consecutive working days.
Source: Central Bank's official website
The last time the central bank conducted a reverse repo operation was on February 17. On the same day, the central bank announced that in order to hedge the influence of the central bank's reverse repurchase expiration and other factors, and to maintain a reasonable and adequate liquidity of the banking system, on February 17, 2020, the People's Bank of China launched a 200 billion yuan medium-term loan facility (MLF) operation and 100 billion 7-day reverse repo operation.
Regarding the central bank's 15-day reverse repurchase suspension, Pan Helin, executive director of the Digital Economics Research Institute of Zhongnan University of Economics and Law, said that the most important reason for the central bank to suspend reverse repurchase is that the current market liquidity is at a reasonable level. Sufficient level, it is no longer necessary to continue reverse repurchase to inject liquidity into the market.
Pan and Lin further stated that there were several other reasons. On the one hand, the current market interest rate has dropped significantly, and the Shanghai Interbank Offered Rate (Shibor) has generally fallen. No reverse repurchase is required to guide the market interest rate downward. On the other hand, the market is currently discussing whether the central bank will cut interest rates. It is estimated that the MLF interest rate and LPR quotes will both decline in March. The suspension of reverse repurchase will make room for subsequent monetary policy and open market operations. It is also a factor to consider.
Source: Official Website of China Foreign Exchange Trading Center
Information from the China Foreign Exchange Trading Center shows that Shibor fell across the board, with Shibor down 8.8 basis points to 1.362% overnight, Shibor down 5.4 basis points to 2.035% in 7 days, Shibor down 3.7 basis points to 1.912% in 14 days, and Shibor down in 30 days. 2.4 basis points to 2.126%.
CITIC solid income pointed out clearly that for domestic monetary policy, the Fed unexpectedly cuts interest rates to deal with the impact of the epidemic, the domestic monetary policy space has further opened up, and the central bank will continue to cut interest rates with a high probability in March. Considering the suddenness of the Fed's interest rate cut, and referring to the experience of global central banks in stabilizing the market in 2008, domestic central banks may also choose to follow up in a timely manner.
The CITIC Securities Research Report believes that with the recent spread of the new crown epidemic in the world, the Federal Reserve has cut interest rates in early March, and the global central bank is expected to face a new round of "rate cuts." China's central bank will continue to actively respond. It is expected that as early as March 16, it will be expected to usher in a "double drop", the inclusive financial cut is expected to fall, and the MLF interest rate is expected to fall slightly. The main policy easing window will most likely be in the second quarter. At that time, the benchmark deposit interest rate and deposit reserve ratio are expected to be lowered, which will cause the LPR interest rate to drop significantly. It is expected that there will be 100 basis points for the annual reserve ratio to be reduced. (Zhongxin Jingwei APP)