On May 5, People's Bank of China announced that in order to maintain the reasonable and sufficient liquidity of the banking system, it launched a medium-term lending facility (MLF) operation of 15 billion yuan, and the winning interest rate was 1250.2%, the same as before. There is a $75 billion MLF due this week.
Excess renewal of MLF for 6 consecutive months
The central bank has exceeded the MLF for six consecutive months. In December last year, MLF operations of 6 billion yuan, 12 billion yuan, 1 billion yuan, 2 billion yuan, 3 billion yuan and 4 billion yuan were carried out in January, February, March, April and May this year. The Beiqing News reporter noted that the last time the central bank adjusted the MLF interest rate was in August last year, when the winning interest rate of MLF and reverse repurchase fell by 5 basis points respectively, and then it has not moved.
Earlier, the central bank's April financial data fell short of market expectations. Since April, some small and medium-sized banks and joint-stock banks have successively lowered deposit interest rates, and the self-discipline upper limit of agreed deposit and call deposit interest rates has been adjusted on May 4. The market is very concerned about whether the policy rate will be lowered this time.
Credit data for the first four months was strong
Everbright Securities Research Report pointed out that the MLF interest rate is the central bank's policy interest rate, which will guide the market interest rate, not the other way around. The yield of 1Y CD (one-year large deposit certificate) and 10Y government bonds is basically around the MLF interest rate as the central fluctuation, and the market interest rate is slightly lower than the policy rate, but "below" does not necessarily correspond to the interest rate cut of the MLF interest rate. Under the current circumstances, the deposit market is somewhat fragmented from the currency and bond markets. At this time, in order to promote the marketization of deposit interest rates and ease the pressure on debt costs, financial institutions have lowered the interest rates of some deposits, but this is not a sufficient condition for MLF to cut interest rates.
Oriental Jincheng released the latest view pointing out that in the context of the economic recovery momentum has become clear, the current need to reduce the policy rate is not high, which is the main reason why the MLF operating rate remained unchanged in May. Specifically, driven by the rebound of household consumption and the strong resilience of infrastructure and manufacturing investment, the macroeconomy has begun to recover since the beginning of the year. Although the manufacturing PMI index fell back to the contraction range in April due to factors such as high base, seasonal fluctuations and repair power switching, the prosperity level of the service industry continued to remain high, and the economy as a whole continued to repair rapidly. The agency expects GDP growth in the second quarter to rise further to about 5.4% year-on-year. Next, the policy will mainly consolidate the foundation for economic recovery by supporting infrastructure investment to maintain rapid growth, fully promoting consumption recovery and increasing support for the real estate industry.
Zhou Maohuat, macro researcher of the financial market department of China Everbright Bank, pointed out that the volume of MLF increased at parity, and the slight increase in MLF slightly exceeded expectations. Mainly due to the strong performance of credit data in the first four months, especially the continuation of the expansion trend of corporate medium and long-term loans, reflecting that the current interest rate level is generally in a reasonable range, at the same time, in recent years, the pressure on net interest margin of some banks has continued to increase, and the net interest margin of some banks has fallen below the warning line. In addition, the weak performance of new credit in the household sector in April reflects the slow pace of recovery in domestic consumption and real estate, but it has not changed the overall recovery trend of domestic demand, and it is expected that the central bank will need to further observe the macroeconomic operation.
The industry expects the LPR interest rate to remain stable in May
Many industry insiders believe that the LPR interest rate that will be released next week will continue to remain stable with a high probability. On the one hand, the MLF policy rate is standing still; On the other hand, the pressure on banks' net interest margin is greater, the demand for credit financing in the real economy has picked up, and the willingness of banks to adjust "extra points" is not strong enough. The central bank is expected to guide financial institutions to make good use of the market-oriented adjustment mechanism of deposit interest rates through RRR reduction (targeted RRR reduction) and structural tools, and further work together to benefit the real economy, especially weak links and key emerging areas, stimulate the vitality of micro subjects, and accelerate the restoration of balance between consumption and domestic demand.
Text/Reporter Cheng Jie (Source: Beijing Youth Daily)