China-Singapore Jingwei, December 20. According to news from China Foreign Exchange Trading Center on the 20th, the People’s Bank of China authorized the National Interbank Funding Center to announce that on December 20, 2021, the loan market quoted interest rate (LPR) is: 1-year LPR is 3.8 %, LPR over 5 years is 4.65%.
The above LPR is valid until the next LPR is issued.
Prior to this, LPR had "stayed in place" for 19 consecutive months.
On the same day, the central bank announced that in order to maintain stable liquidity at the end of the year, the People's Bank of China launched a 7-day and 14-day reverse repurchase operation on December 20, 2021, using interest rate bidding for a total of 20 billion yuan.
On December 15, the central bank lowered its RRR by 0.5%, releasing about 1.2 trillion yuan in long-term funds.
On the same day, the 950 billion MLF expired, and the central bank reduced the volume and carried out the 500 billion MLF operation.
The 450 billion yuan due was replaced by RRR cut funds, and the central bank realized a total of 750 billion yuan in medium and long-term funds.
China Merchants Securities recently analyzed and pointed out that the December LPR quotation reflects the game of multi-party power: From a policy perspective, supervision is based on the consideration of "steady growth" and "appropriately advanced policy force", and may guide LPR quotation this month Downward; but from a market perspective, financial institutions may keep the LPR quotation unchanged due to business needs and "risk prevention" considerations.
Huang Wentao, chief economist of China Securities Investment, believes that the central bank's policy interest rate adjustments are not motivated by the rising pressure to stabilize growth but still need to insist on housing and housing speculation. However, the LPR one-year quotation rate may still be lowered by 5bp.
The first is that the two RRR cuts have met the requirements of one LPR cut. Second, this year's deposit benchmark interest rate reform has promoted the reduction of bank deposit costs and also provided the possibility for the LPR cut.
Sinolink Securities issued a research report on December 18, stating that no matter whether LPR is adjusted or not, it will not affect the policy trend of the market outlook.
If the one-year LPR is lowered, expectations of short-term lenient credit will increase, which will squeeze bonds and be negative in the short-term. In the long run, since the LPR reform, every LPR reduction has experienced a policy easing cycle, which will benefit the bond market.
On December 19, Zhongtai Securities pointed out that the current need for interest rate cuts has increased: first, it is difficult to alleviate corporate cost pressures in the short term; second, actual loan interest rates may rebound; third, the United States has not really entered the interest rate hike cycle.
There will not be only RRR cuts in this round of monetary easing cycle, and there is a high probability that interest rate cuts will not be absent.
If the central bank starts to cut interest rates, bonds may benefit the most. At that time, the room for downside yields is expected to open, and the small and medium-cap growth style of the equity market is relatively dominant. However, as the Fed's interest rate hikes approach, the domestic interest rate cuts will bring a stage. Sexual opportunities also need to be vigilant about subsequent style adjustments.
(Zhongxin Jingwei APP)
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