The Sino-Singapore Jingwei client reported on the morning of June 4th that the central bank issued an announcement saying that a 70 billion yuan reverse repurchase operation was carried out through interest rate tendering for a period of 7 days and the winning bid rate remained unchanged at 2.20%. The central bank said that the reverse repurchase was carried out to hedge the impact of factors such as the expiry of reverse repurchase in the open market and government bond issuance and other factors, and to maintain reasonable and sufficient liquidity in the banking system.

  Wind data shows that the 240 billion yuan reverse repurchase that was launched on May 28 today expires, achieving a net return of 170 billion yuan.

  Source: Central Bank website

  Prior to the last week of May, the central bank restarted the 37-day reverse repurchase operation. Within four working days from May 26 to 29, the central bank carried out reverse repurchase operations of 10 billion yuan, 120 billion yuan, 240 billion yuan, and 300 billion yuan, respectively, for a period of 7 days, and the winning bid rate was 2.20%. The central bank announced that the reason for the continuous reverse repurchase operation is to hedge the issuance of government bonds, corporate income tax settlement and other factors.

  According to the latest data released by the Ministry of Finance, the scale of local debt issuance reached 1.3 trillion yuan in May, the highest in history. Prior to this, the month with the largest monthly issuance of local bonds was 1.06 trillion yuan in April 2016.

  Overall, from January to May, 3.2 trillion yuan of local bonds were issued, of which 2.7 trillion yuan was newly issued. According to the government work report arrangement, this year's new local debt quota is 4.73 trillion yuan, which means that there will be 2 trillion yuan of new local debt to be issued in the future.

  Guoyue Securities Zhou Yue's solid collection team pointed out that due to the impact of the supply of special bonds in May, the superposition of seasonal factors such as tax and foreign exchange settlement, the funds have tightened, and the overnight fund interest rate has risen rapidly. There is room for large-scale issuance, and the supply of local government bonds may have an impact on the capital at a specific point in time.

  According to Zhao Wei, chief macro analyst of Cheung Kong Securities, under the requirement of “accelerating the issuance of bonds issued”, local bonds and special government bonds are expected to accelerate the issuance around the middle of the year. The potential shock may not be small, and the central bank may provide liquidity support through tools such as reverse repurchase and deposit rate. (Sino-Singapore Jingwei APP)