Three-day volume of 370 billion yuan, reverse repurchase to hedge local debt?
The issuance of local bonds has accelerated. The scale of this week's issuance has exceeded 420 billion. The central bank issued 370 billion liquidity red envelopes on the 3rd to hedge
Beijing News (Reporter Cheng Weimiao) The central bank announced on May 28 that in order to hedge the impact of government bond issuance, corporate income tax settlement and other factors, and maintain a reasonable and sufficient liquidity in the banking system, a 240 billion yuan 7-day period was launched. Reverse repurchase operation, the winning bid rate remained unchanged at 2.2%. This is the third consecutive day that the central bank has issued liquidity packages to the banking system. The total scale of the three-day distribution is 370 billion yuan, and the reverse repurchase scale on the 28th was the highest in a single day since February 10.
Short-term capital interest rate rises, the central bank issued 370 billion liquidity packages for three consecutive days
In the last week of May, the reverse repurchase operation was suspended for nearly two months (37 working days) and "appeared" again. First, on May 26, the central bank launched a 10 billion yuan 7-day reverse repurchase operation, which was regarded as a signal that the central bank would maintain sufficient liquidity; then on the 27th, it launched a 120 billion yuan 7-day reverse repurchase operation. On the 28th, a 240 billion yuan 7-day reverse repurchase operation was carried out. The winning interest rate for all three operations was 2.2%, and a total of 370 billion yuan was released.
As the central bank said in the announcement, the reason for issuing liquidity red envelopes is to hedge the issuance of government bonds, corporate income tax settlement and other factors. From the perspective of short-term fund interest rate trends, the market funds have tightened significantly in the near future. The overnight Shibor interest rate, which has been below 2% since March 12, has risen sharply over 100 basis points this week, rising from 1.09% on the 22nd to 2.1% on the 27th. It fell only 0.2 basis points on the 28th , The interest rates of other maturities on that day are still rising collectively.
In addition, the weighted average interest rate of the deposit institution's pledged repo overnight rate (DR001) was reported at 2.1132% on the 28th, and the weighted average price of the deposit institution's pledged repo 7 day rate (DR007) was reported to 2.1839%. 70 basis points.
The color of Chief Economist of Founder Securities said that the short-term liquidity management of the central bank depends on spreads and capital needs. When DR007 rises close to the reverse repurchase rate of 2.2%, it means that the spreads have narrowed. Yu then do reverse repurchase to put short-term liquidity (such as the operation on May 27). And after the peak of capital demand (the peak of bond issuance and the cross-month effect of funds, etc.), it should be more desirable for DR007 to return to the recent central level of 1.5%.
The issuance of local bonds has accelerated, and the scale of this week's issuance has exceeded 420 billion yuan
Regarding the reasons for the tight market liquidity in the recent days, the industry generally pointed out two points: First, the net issuance of local bonds in the last week of May exceeded 700 billion yuan, a record high in weekly issuance, and the central bank was required to hedge moderately; second, the end of month effect As a result, there have been some changes in the supply and demand of funds in the inter-bank market. This is a seasonal phenomenon that basically occurs every month. Today, the DR007 interest rate at the end of February, March, and April all showed a seasonal upward trend.
But the market has expectations for both. Regarding the accelerated issuance of local special bonds, before the two sessions, the Ministry of Finance had issued in advance three batches of the new special debt limit of 2.29 trillion yuan in 2020, and requested the third batch of 1 trillion special debt to be issued by the end of May .
The Beijing News reporter saw from the China Bond Information Network that as of 17:00 on the 28th, there were Beijing, Jiangsu, Jiangxi, Jilin, Ningxia, Xiamen, Shanghai, Qingdao, Hainan, Shandong, Qinghai, Xinjiang, Hebei, and Hubei within this week. 15 places including Henan and Henan have issued announcements on the results of local bond issuance. According to the rough statistics of reporters, the scale of the issuance exceeded 420 billion yuan.
On May 28th, Gansu, Yunnan, and Hunan also issued bids for local government bonds. As of press time, the bids for the local governments' bonds have been closed. "It will be issued shortly after the bidding," said one person in the financial system. The reporter also noticed that both Beijing and Jiangsu closed the bidding on the 28th, and the release results were released in the afternoon.
"Lower interest rate cuts" lead to lower bond market, will monetary policy easing slow down?
"The current market is very concerned about the direction of monetary policy in June, and there are views that are pessimistic about the extent of monetary easing, believing that monetary policy will shift from emergency management to normal operation, and the rate of policy easing will slow down, causing tensions in the bond market and Pessimistic mood. "Color said. After the announcement by the central bank to restart the reverse repurchase operation on May 26, Treasury bond futures plummeted because the expectation of a “rate cut” in reverse repurchase fell through.
Judging from the 10-year Treasury yield, it opened at 2.662% and closed at 2.7% on May 26, with an increase of 2.12% on the day, a further increase of 0.48% on the 27th, and a slight decrease of 0.35% on the 28th. "The rapid changes in yields have expanded financial risks, and it is time to invest steadily." Zhang Xu, chief analyst of Everbright Securities Co., Ltd., further stated that there are no emergencies that are sufficient to prompt interest rate cuts in open market operations. The reverse repurchase is to smooth out short-term fluctuations in the liquidity of the banking system.
In Zhang Xu's view, he does not worry too much about the short-term liquidity pattern, but in the medium and long term, the upward trend of capital interest rates is the general trend. Time is no longer a friend of bond investors, and the current price-performance ratio of interest-rate products is getting lower. Therefore, investors are advised to take the opportunity to shorten the duration of the portfolio in the process of falling interest rates in the future, rather than continue to participate in short-term volatility games at this time.
Industry insiders also said that the tone of loose monetary policy has not changed. Wen Bin, chief researcher of China Minsheng Bank, believes that the liquidity pressure in June still exists. First, there is seasonal pressure at the end of half a year; second, there are two issues with a total of 740 billion MLF due; third, the government work report has made it clear this year The fiscal deficit and the scale of local government special bonds are expected to speed up the issuance of government bonds and promote a rebound in domestic demand as soon as possible. In June, the central bank is expected to adopt a combination of various monetary policy tools such as “full reduction of standards + MLF placement + reverse repurchase”, and at the same time supplemented by the combination of “7-day reverse repo + 28-day reverse repo” to maintain market liquidity Sufficient and reasonable and stable market interest rates.
The color indicates that in order to cooperate with fiscal policy, the use of RRR cuts for banks to release liquidity will be the central bank's main idea, and every weekend from June to the end of May will be a window for RRR cuts. The current fiscal policy will play a more leading role, while monetary policy mainly cooperates with fiscal efforts for easing, rather than flooding. Therefore, the central bank will provide liquidity support corresponding to commercial banks at the time of issuance of government bonds, especially the special government bonds in June. In June, special government bonds will still be issued in a market-oriented manner, with commercial banks as the main body of subscription. By then, the central bank will inevitably provide liquidity support to the commercial banks. By reducing the standard, the commercial banks will be able to expand their assets and subscribe for special government bonds.