Sino-Singapore Jingwei Client, August 26, according to the announcement on the central bank's website, in order to maintain a reasonable and sufficient liquidity in the banking system, the People's Bank of China launched a 200 billion yuan 7-day reverse repurchase operation on August 26 through interest rate bidding.
Screenshot of central bank announcement
In terms of funding, on August 25, the central bank increased its net investment in the open market, and the short-term funding supply in the interbank market further loosened. The overnight repo weighted interest rate fell sharply by more than 40bp and broke 2% to close to 1.92%.
According to Wind data, this week (August 22 to 28), the central bank’s open market has 610 billion yuan of reverse repurchase maturities, of which 50 billion yuan, 100 billion yuan, 150 billion yuan, and 150 billion yuan will expire from Monday to Friday. 160 billion yuan, 150 billion yuan, no repurchase and expiry of central bank bills. In addition, 150 billion yuan of medium-term loan facilities (MLF) expired on August 26. The central bank had previously renewed the two MLFs that expired in August at one time.
The Sino-Singapore Jingwei Client noticed that this week, the central bank has carried out reverse repurchase for three consecutive trading days. Tianfeng Fixed Income Research reported that the reason for the central bank’s 14-day reverse repurchase since late August was mainly to hedge government bond issuance payments. Regarding the interest rate of funds, the central bank's requirements mainly have two aspects. On the one hand, the central bank does not want interest rates to be too low. On the other hand, the central bank hopes that market interest rates will fluctuate around the central policy interest rate.
Jianghai Securities analyzed that the central bank's recent 14-day reverse repurchase operation is more like an aid to hedge liquidity gaps rather than "shortening and increasing length." With the subsequent release of fiscal funds, funding may usher in a phased relaxation.
On August 26, Sun Guofeng, Director of the Monetary Policy Department of the Central Bank, pointed out at the State Council’s regular policy briefing that the uncertainty brought about by the epidemic has increased and financial market sentiment will inevitably be affected. Monetary policy needs greater certainty to respond Various uncertainties, that is, the orientation of the three unchanged, prudent monetary policy remains the same; maintain the flexibility and appropriate operating requirements unchanged, neither let the market lack money, nor allow the market money to overflow; adhere to the normal monetary policy The determination remains unchanged. There is no zero interest rate or even negative interest rate, and unconventional monetary policy such as quantitative easing, so there is no so-called exit problem.
In addition, as of August 20, the loan market quoted interest rate (LPR) has been "standstill" for four consecutive months. Dong Ximiao, chief researcher of the Zhongguancun Internet Finance Research Institute, said that liquidity is expected to remain reasonably abundant in the second half of the year, LPR interest rates will continue to decline, and mortgage interest rates based on LPR interest rates will also follow the trend, but the range will shrink.
Sun Guofeng also said on the 26th that the trend of LPR depends on factors such as macroeconomic trends, inflation, and supply and demand in the loan market, depending on the market-based quotation of the quotation bank. With the further release of the potential of the LPR reform to promote lower loan interest rates, it is expected that subsequent corporate loan interest rates will fall further. (Zhongxin Jingwei APP)