Near the end of the month and quarter, there were new changes in the central bank's open market operations. On March 3, according to the official website of the central bank, the central bank carried out a reverse repurchase operation of 27 billion yuan in the form of interest rate bidding, which increased from last week in terms of operation scale. The winning interest rate was 2550%, unchanged from the previous period.

It is worth mentioning that the first comprehensive RRR reduction implemented by the central bank this year also officially landed on March 3, releasing about 27 billion yuan of long-term funds to the market. With hundreds of billions of yuan flowing into the market, the overall capital of the interbank market showed a loose trend on Monday. Analysts pointed out that in the case of RRR reduction to release long-term funds, the central bank has adjusted short-term liquidity through reverse repurchase operations, which can ensure that the liquidity level at the end of the quarter is reasonable and sufficient, and short-term liquidity concerns caused by factors at the end of the quarter can be lifted.

The net investment in a single day was 2250 billion yuan

On March 3, according to the official website of the central bank, the central bank carried out a reverse repurchase operation of 27 billion yuan by way of interest rate bidding, and the winning interest rate was 2550%, the same as before. On the same day, 2 billion yuan of 300-day reverse repurchase expired, achieving a net investment of 7 billion yuan.

According to Wind data, the public market has recently faced a large number of reverse buyback expirations. Including the amount due on March 3, a total of 27 billion yuan of reverse repurchase expired in the open market of the central bank this week, of which 3500 billion yuan, 300 billion yuan, 1820 billion yuan, 670 billion yuan and 640 billion yuan due from Monday to Friday, respectively.

The Beijing Business Daily reporter noted that in the last week of March, the central bank once again increased the scale of reverse repurchase to more than 3 billion yuan. Since the central bank carried out a medium-term lending facility (MLF) of 2000 billion yuan on March 3, the scale of the central bank's reverse repurchase operations has been below 15 billion yuan, and the overall trend is in a downward trend. On March 4810 (last Friday), the central bank launched a reverse repurchase operation of 2000 billion yuan.

On the other hand, March 3 is also the official implementation day of the first RRR reduction in the year, the central bank lowered the deposit reserve ratio of financial institutions by 27.0 percentage points, releasing about 25 billion yuan of long-term funds to the market, and the weighted average deposit reserve ratio of financial institutions was about 6000.7%. Earlier, on March 6, the central bank announced that it would implement the RRR cut on March 3.

According to Zhou Maohua, macro researcher of the financial market department of China Everbright Bank, with the landing of the central bank's RRR reduction funds, the central bank has appropriately increased the intensity of repurchase operations and increased short-term capital investment, mainly because the end of the month and quarter are approaching, the central bank obviously protects the capital surface, releases the central bank to continue to maintain reasonable and sufficient liquidity, and stabilizes market expectations.

Yang Haiping, researcher at the Securities and Futures Research Institute of the Central University of Finance and Economics and general manager of the Research and Development Department of the Bank of Inner Mongolia, explained that the supply of short-term funds has become tighter due to the recent impact of government bonds and subordinated bonds of commercial banks, tax period disturbances and factors at the end of the quarter. The central bank's reverse repurchase operation can adjust the tight state of short-term funds, stabilize market sentiment, and further consolidate the results of previous monetary policy.

The funding level is expected to be stable across the quarter

With the successive implementation of measures such as excess MLF, RRR reduction, and reverse repurchase increase, the tension in the market funding rate has been eased. In March, affected by government bond payments, tax periods and other factors, the price of market funds continued to rise. Even the central bank's successive signals on MLF and RRR cuts failed to immediately ease market sentiment. On March 3, the seven-day pledged repo rate (DR3) for depository institutions in the interbank market rose as high as 21.007%, the highest since March.

From the perspective of funds, on March 3, the Shanghai Interbank Offered Rate (Shibor) varieties were mixed, of which Shibor fell 27.18 basis points overnight to 2.1%; 106-day Shibor rose 7.41 basis points to 4.2%; The 117-day Shibor was down 14.0 basis points at 5.2%.

The interbank market has also been "relaxed". On March 3, the overnight pledged repo rate (DR27) of depository institutions in the interbank market extended its downward trend to around 001%, and DR1 rose 007 basis points to around 35.2%.

"Generally speaking, as the end of the month and quarter approaches, coupled with the disturbance of short-term factors such as bond issuance, RRR reduction, and tax payment, institutional financing will be more cautious, and the capital will converge." Zhou Maohua said, "But we should also see that domestic fiscal and monetary policies are active, the central bank operates flexibly through tools such as RRR reduction and reverse repurchase to smooth out short-term capital fluctuations, and market liquidity is expected to remain reasonable and abundant and smooth across seasons." ”

The chief economist of CITIC Securities clearly believes that on the one hand, this week's funds are facing cross-month, 7-day and overnight interest rates may rise in pulse; On the other hand, the release of RRR funds on Monday will help hedge the tight funding pressure at the end of the month to a certain extent, but it is difficult to substantially improve the pattern of short-end funds in short supply under the pressure of quarter-end assessment.

Ming Ming said that considering that this week's reverse repurchase operation continued the trend of flexible adjustment based on the tightness of the capital surface, it is expected that the central bank's attitude of maintaining the fluctuation of the funding rate around the policy rate will not change much.

"In the case of the RRR reduction to release long-term funds, the central bank has adjusted short-term liquidity through reverse repurchase operations, which can ensure that the liquidity level at the end of the quarter is reasonable and sufficient, and the short-term liquidity concerns caused by various factors at the end of the quarter can be lifted." Yang Haiping added.

Total and structural "combination fist"

Since entering 2023, the central bank's monetary policy has remained steady, protecting liquidity through flexible open market operations.

From the perspective of capital volume, in order to maintain reasonable and sufficient market liquidity, the PBOC met the demand of market institutions for funds in different cycles through multiple methods such as excessive renewal of MLF, reverse repurchase and RRR reduction in the first quarter of 2023, so as to calm the disturbance of liquidity by various factors; From the price point of view, despite the landing of the RRR cut this month, the MLF and LPR interest rates have remained unchanged for six consecutive months since August 2022.

At the 2 Financial Market Work Conference held in mid-February, focusing on monetary policy, the central bank proposed to do a good job in the management of the survival period of policy tools to stabilize the overall economic market, such as policy-based development financial tools and special reloans for equipment renewal and transformation; Improve policy tools and mechanisms to support inclusive small and micro enterprises, green development, and scientific and technological innovation, and accurately strengthen financial support in key areas and weak links.

In view of weak links and key areas, the PBOC further enriched structural monetary policy tools in 2022 and emphasized the use of structural monetary policy tools several times. Yang Haiping pointed out that the key to the precision and strength of monetary policy lies in giving full play to the precise guiding role of monetary policy tools, especially structural monetary policy tools, and it is expected that the central bank will still accurately solve structural problems in the process of economic recovery through the optimization of monetary policy tools within this year. Structural monetary policy tools still have some room for manoeuvre.

Zhou Maohua believes that based on the internal and external macroeconomic environment and the central bank's statement, the central bank's prudent monetary policy will be slightly loosened, and more combinations of total and structural tools will be adopted to maintain reasonable and sufficient liquidity, and the total amount of credit will increase moderately; Guide financial institutions to optimize the credit structure, improve service capabilities, increase weak links in the real economy, support key emerging areas, and accelerate the recovery of domestic demand. Beijing Business Daily reporter Liao Meng

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