China-Singapore Jingwei Client, March 30th, after a lapse of 29 trading days, the Central Bank announced a "rate cut."
On the 30th, the central bank restarted open market operations and conducted a 50 billion yuan reverse repurchase operation, winning a bid rate of 2.2%, which was 2.4%. The central bank announcement explained this, "to maintain ample liquidity in the banking system."
Subsequently, the WeChat public account of the central bank rarely published a "open market operation bidding interest rate dropped by 20 basis points." According to the observations of the client of Sino-Singapore Jingwei, this is the first time that the reverse repo operation announcement has been issued since the central bank opened the WeChat public account.
Ma Jun, a member of the Central Bank ’s Monetary Policy Committee and a researcher at the National Institute of Finance of Tsinghua University, said in an interview with the Financial Times, the central bank ’s head of the media, that a 20 basis point drop in the bid rate for the open market operation marked a further increase in countercyclical adjustment.
He further pointed out that the choice to reduce interest rates at this point should be a decision made after taking into consideration the domestic resumption of production and production, the international epidemic, and the deterioration of the external economic environment.
Why "rate cut" at this time?
At the G20 meeting held on March 25, Yi Gang, the governor of the central bank, stated that under the current situation, G20 countries need to strengthen coordination and simultaneously adopt a combination of macroeconomic policies to effectively respond to the impact of the epidemic. China supports the G20 as a major platform for international macroeconomic policy coordination to continue to strengthen coordination and maintain global economic and financial market stability.
A meeting of the Political Bureau of the CPC Central Committee was held on March 27, proposing "to strengthen the adjustment and implementation of macroeconomic policies. We must promptly study and propose a package of macroeconomic policies and measures that should be actively responded to, and proactive fiscal policies must be more proactive and prudent. Be more flexible and appropriate, increase the fiscal deficit rate appropriately, issue special government bonds, increase the scale of local government special bonds, guide the decline in interest rates on the loan market, and maintain reasonable and sufficient liquidity. "
Later on the 27th, the central bank's website posted the content of the People ’s Bank of China ’s Monetary Policy Committee ’s first quarter of 2020 (the 88th) regular meeting. It mentioned that it would work hard to clear the transmission of monetary policy and continue to unleash the potential for reforms to reduce the real interest rate of loans. Guide financial institutions to increase support for the real economy, especially small, micro, and private enterprises, and strive to make financial support for private enterprises compatible with their contribution to economic and social development, and promote the formation of supply systems, demand systems, and financial systems The triangular framework of mutual support promotes the overall virtuous circle of the national economy.
Dongfang Jincheng's chief macro analyst Wang Qing pointed out that the 7-day reverse repurchase rate reduction can be regarded as a concrete implementation of the CPC Central Committee Political Bureau meeting deployment. He believes that after the open market policy interest rate is reduced, the bank's marginal cost of funds will decrease, which will help push down the loan interest rate. The significant increase in interest rate cuts this time indicates that, in the context of rising overseas epidemics and the pressure of external demand in the second quarter, the downward pressure on the domestic macro economy will increase further in the future, and monetary policy will need to be strengthened in countercyclical adjustments.
The deputy director of CITIC Securities Research Institute has publicly revealed that in the package of macro-control measures proposed by the Political Bureau of the Central Committee, fiscal counter-cyclical adjustments are expected to be strengthened. It is estimated that the total size of the stimulus policy for the whole year of 2020 may reach 10.7 trillion. Monetary policy will cooperate with fiscal efforts to boost actual demand and improve corporate profits. The "more flexible" monetary policy proposed at the Politburo meeting may be reflected in monetary policy tools and directions, such as continuing to promote new types of monetary policy tools such as special reloans, while continuing to use the "three gears and two excellent" deposit reserve ratio, refinancing Structural monetary policy tools such as rediscounting are used to strengthen credit support for small, micro, and private enterprises.
Paving the way for LPR downgrades?
Ma Jun revealed that lowering the open market operation interest rate can further reduce the financing cost of the real economy. The LPR reform has improved the transmission of interest rates from the money market to the interest rate on the loan market. Interest rates in the money market can affect banks' quotes on medium-term lending facilities (MLF) and can be further transmitted to the LPR interest rate through the MLF interest rate, thereby leading to changes in loan interest rates. Therefore, the reduction of the open market operation interest rate should also be able to be effectively transmitted to the real economy, which is reflected in the reduction of corporate financing costs.
Wen Bin, chief researcher of China Minsheng Bank, said that from the past experience, the "reverse repurchase rate-MLF interest rate-LPR" was reduced simultaneously, completing a complete interest rate reduction process. On November 5, last year, the one-year MLF interest rate was reduced by 5bp to 3.25%, and on November 18, the 7-day reverse repurchase rate was simultaneously reduced by 5bp to 2.5%, and the one-year LPR of the month was also reduced by 5bp to 4.15%. After the Spring Festival holiday this year, the 7-day reverse repo rate was reduced by 10bp to 2.4% on February 3, and the one-year MLF interest rate was reduced by 10bp to 3.15% on February 17 to guide the one-year LPR of the month to decrease by 10bp to 4.05%. .
Wen Bin predicts that before the LPR quotation in April, the central bank will take the opportunity to reduce the MLF interest rate, guide the LPR downward, and make greater efforts to reduce the financing cost of the real economy.
Wang Qing pointed out that the 7-day reverse repurchase rate reduction will lead to a coordinated adjustment of the policy interest rate system. It is expected that the April regular MLF bidding interest rate will also be reduced by 20 basis points and guide the 1-year LPR quotes to show the same range. Down.
Wang Qing even predicted that in April the MLF interest rate and the one-year LPR offer would be reduced by 20 basis points, and the bank loan interest rate is expected to fall further.
Deposit benchmark interest rate reduction window opens?
There have been many opinions that the reduction of the benchmark deposit interest rate is expected to come to fruition in mid-late April. However, after the central bank restarted the reverse repo operation, the market views on whether the benchmark deposit interest rate was lowered were different.
Wen Bin believes that the current cost of bank debt is high, the pressure drop spread is limited, and corporate and residential sector deposits account for more than 60% of the bank's total debt. A timely and moderate reduction of the benchmark deposit interest rate will have a more significant effect on the decline of LPR.
Wang Qing analyzed that the current benchmark interest rate for deposits remains unchanged, the cost of bank deposits is very rigid, and the decline in loan interest rates also means that banks' net interest margins have further narrowed. We judge that there is room for a slight reduction in the benchmark deposit interest rate. However, during the special period of the current epidemic, the banking system will also moderately lend to the real economy by actually reducing loan interest rates.
Obviously, lowering the benchmark interest rate for deposits is more sensitive. After all, it involves the interests of depositors and requires comprehensive consideration of many factors. However, this is still one of the monetary policy tools. Next, we need to look at the domestic and foreign economic and financial development situation before making judgments. (Zhongxin Jingwei APP)