Sino-Singapore Jingwei Client, August 18, after the 700 billion mid-term lending facility (MLF) exceeded expectations, the central bank today (18) launched a 100 billion reverse repurchase operation. As 50 billion yuan of reverse repurchase expired on that day, a net investment of 50 billion yuan was realized.
The central bank stated that, in order to hedge against the impact of tax peaks and other factors and maintain reasonable and sufficient liquidity in the banking system, on August 18, the People's Bank of China launched a seven-day reverse repo operation of 100 billion yuan through interest rate bidding, and the winning interest rate was 2.20%.
Wind data shows that this week (August 15-21), the central bank's open market will have 950 billion yuan of funds due, including reverse repurchase due on August 17, 18, 19, 20, and 21 The scales are respectively 10 billion yuan, 50 billion yuan, 140 billion yuan, 150 billion yuan, and 150 billion yuan. On August 20, another 50 billion yuan of treasury cash deposits expired. Therefore, there will be 950 billion yuan in full-caliber due funds next week.
New latitude and longitude in the data map
Excess sequel to MLF
On August 17, the central bank renewed the MLF one-off as agreed, but the scale greatly exceeded expectations. The renewal scale reached 700 billion yuan, which was the first time since April to renew the MLF. According to the analysis, the over-renewal of MLF is related to factors such as the low over-reserve rate of banks and the greater pressure of local bond issuance.
"The central bank over-extended MLF by 700 billion yuan and kept interest rates unchanged, and liquidity is more loose than in June and July." Hue, chief economist of Founder Securities and deputy director of the Institute of Economic Policy of Peking University, pointed out that monetary policy is based on Stability is the priority, and there will be no further tightening. In terms of liquidity, marginal easing will support it. The domestic epidemic is under control, and economic fundamentals have gradually come out of the impact of the epidemic. In July, real economic data has further rebounded. In this context, the central bank will continue to implement a normalized monetary policy, focusing on stability and will not further tighten.
CITIC Fixed Income clearly stated that the MLF excess sequel was larger than expected by the market. Since August, the central bank's capital investment has increased significantly. This has changed the trend of net capital withdrawal in June and July. First, because of the relatively large demand for market liquidity Second, the coordination of fiscal and monetary policies needs to be strengthened. The supply of government bonds and local bonds in August is relatively large, and liquidity support is needed. It is expected that the 10-year treasury bond yield may return to around 2.8%.
The executive meeting of the State Council held on August 17 required to maintain reasonable and sufficient liquidity but not to engage in flood irrigation, but to effectively play the role of precise drip irrigation as a structural direct monetary policy tool to ensure that new financing flows to the real economy, especially small and micro enterprises ; Improve the convenience of financial support policies, support small and medium-sized banks to use big data for effective bank-enterprise docking, clear the transmission mechanism, and expand the benefits of market entities. Deepen the reform of market quoted interest rates and guide loan interest rates to continue to decline.
In the "Report on the Implementation of China's Monetary Policy in the Second Quarter of 2020," the central bank also made it clear that the future monetary policy will be "more flexible, moderate, and precise." Comprehensive use of multiple monetary policy tools to maintain reasonable and sufficient liquidity, guide market interest rates to operate smoothly around open market operating interest rates and medium-term lending convenience interest rates, and maintain a reasonable growth in the money supply and the scale of social financing.
New latitude and longitude in the data map
LPR downgrades are likely to fail
Another focus of the MLF sequel is whether interest rates will be lowered. The central bank generally announces the LPR interest rate on the 20th of each month. The MLF operations and interest rates announced on the 15th were postponed on weekends. The interest rate of MLF will play a role in pointing to the LPR interest rate of the current month.
Judging from this operation, the central bank still maintains the equivalent operation in the price policy, and the interest rate remains at 2.95%. Up to now, it has not adjusted for 4 consecutive months. At the same time, the reverse repo rate operated by the central bank on the 17th remained unchanged at 2.2%.
From May to July, LPR remained unchanged regardless of whether it was one year or more than five years. The analysis believes that based on previous experience, before LPR goes down, MLF operating interest rates will be lowered first. Given that the interest rate of this MLF operation is still 2.95%, the probability of a rate cut in the short term will be greatly reduced.
Zhang Dawei, chief analyst of Centaline Real Estate, believes that MLF’s over-sequel represents that funding will continue to be loose. On August 20, the fourth consecutive month of LPR interest rate cuts will be basically determined. He said that easing of funds is conducive to financing for real estate companies. The central bank maintains a stable price of funds. There is little room for a fall, but the possibility of an increase is also small. (Zhongxin Jingwei APP)
(The opinions in the article are for reference only and do not constitute investment advice. Investment is risky and you need to be cautious when entering the market.)