At the beginning of the month, the central bank’s reverse repurchase operations rarely increase the amount to maintain a reasonable and sufficient liquidity
Author: Duan Siyu
[ 11月3日，央行开展500亿元7天期逆回购操作投放流动性，操作量比2日增加400亿元，较前几日每天100亿元的操作明显放量。 ]
At the beginning of the month, the central bank’s reverse repurchase increase was rare to maintain reasonable and sufficient liquidity
Different from the operations of the previous two days, on November 3, the central bank’s reverse repurchase operation changed. According to the announcement, in order to maintain reasonable and sufficient liquidity in the banking system, the Central Bank of Japan launched a 7-day reverse repurchase operation of 50 billion yuan, and on November 1 and 2, this scale was both 10 billion yuan.
At the beginning of the month when the total liquidity was relatively abundant, it was rare for the central bank to increase the amount of reverse repurchase operations.Everbright BankAnalyst Zhou Maohua told CBN reporters that this is mainly due to the fact that market liquidity is facing some short-term interference in the near future. The central bank needs to maintain a certain degree of flexibility in adjusting its policies, that is, through various tools such as MLF (Mid-term Lending Facility) and open markets. Hedging to ensure reasonable and abundant liquidity.
Increase the amount of reverse repurchase operations to 50 billion
In recent months, it has become the norm for the central bank to continuously carry out 10 billion yuan reverse repurchase operations at the beginning of the month. However, entering November, this situation has changed.
On November 3, the central bank launched a 7-day reverse repurchase operation of 50 billion yuan to release liquidity. The operation volume increased by 40 billion yuan from the 2nd, which was significantly higher than the daily operation of 10 billion yuan in the previous few days. This was the total liquidity at the beginning of the month. Periods when the amount is relatively abundant are relatively rare.
From the perspective of industry insiders, the increase of the central bank’s operations on the 3rd showed that the central bank’s words and deeds have maintained a reasonable and sufficient liquidity attitude, which will help stabilize market expectations and keep money market interest rates running smoothly around the central bank’s operating interest rates.
For this week, according toGF SecuritiesThe analysis shows that the factors that affect the funding range mainly include four aspects. The first is that the scale of government bond issuance has declined. The scale of issuance this week was 211 billion yuan. On Wednesday, the issuance of government bonds was relatively large, with a single-day issuance of 136 billion yuan. The net payment of government bonds (excluding maturity) also declined to 237.3 billion yuan. Secondly, due to the central bank’s large-scale reverse repurchase investment for several consecutive days at the end of October, a total of trillion yuan of reverse repurchase expired this week, and the pressure on expiration was greater; in addition, the interbank deposit certificates expired 290 billion yuan this week. Last week, it was 405.7 billion yuan; finally, the fiscal expenditure at the end of October had a supplementary effect on liquidity, but October was a regular month for expenditure, which was not as good as September.
“In the near future, capital is affected by short-term factors such as tax payment, the large maturity of MLF and open market instruments, the issuance of local government special bonds, and fiscal expenditures. The central bank needs to appropriately increase open market operations to smooth out fluctuations in capital. Zhou Maohua told reporters.
Looking at the overall stability of the market interest rate trend, the central bank’s operations have achieved the expected results, and the market has relatively sufficient expectations for maintaining reasonable and sufficient liquidity. Data shows that after the reverse repurchase operation, on November 3, DR001、DR007Interest rates for all maturities have declined.
Specifically, in terms of inter-bank pledged repo interest rates, the weighted average interest rate of DR007 closed at 2.1163%, down 4.23BP from the previous day; the weighted average interest rate of DR001 closed at 1.9851%, down 11.97BP from the previous day;Shanghai BankIn terms of Shibor, most of the short-end products declined, overnight products fell 12.6BP to 2%, 7-days fell 4.8BP to 2.137%, and 1-months rose 0.3BP to 2.397%.
“On the one hand, the operation of the central bank reflects flexibility. On the other hand, the release of liquidity will keep the fund in a stable state in order to calm short-term disturbances.” Zhou Maohua said.
Escort the smooth operation of funds
Except this week, as far as November is concerned, many people in the industry believe that liquidity is still under certain pressure. Cinda Securities chief fixed income analyst Li Yishuang said that this month’s liquidity is mainly affected by three factors.
First, the currency issuance and foreign exchange accounted for in November may still only change slightly. In November, the payment base usually rebounds slightly, and the statutory deposit reserve may increase by about 100 billion, which has a negative impact on liquidity.
Second, new special bonds should be issued at the end of November as much as possible, and the scale of superimposed treasury bond issuance may continue to increase. The net supply of government bonds in November may still be close to a trillion scale; at the same time, the fiscal balance in November may exceed a trillion scale. On the whole, government deposits in November decreased by about 150 billion yuan from the previous month, slightly lower than the average level of 2019-2020, which will form a certain support for liquidity.
Third, reverse repurchase and MLF expiration on a large scale in November. “The central bank increased the reverse repurchase investment before the October tax period, showing the policy attitude of continuing to maintain the overall stability of funds. Therefore, it is expected that the central bank will continue to increase the reverse repurchase investment scale to supplement liquidity in November.” Li Yishuang said .
Previously, Sun Guofeng, Director of the Monetary Policy Department of the Central Bank, said in a press conference about the trend of monetary policy in the fourth quarter that the central bank will comprehensively consider the liquidity situation and the needs of financial institutions, and flexibly use multiple monetary policies such as MLF and open market operations. Tools, timely and appropriate placement of liquidity of different periods, smoothing out short-term fluctuations, meeting the reasonable funding needs of financial institutions, and maintaining reasonable and sufficient liquidity. At the same time, the implementation of structural monetary policy tools will also play a certain role in increasing the total amount of liquidity.
Sun Guofeng also said that in the next stage, a prudent monetary policy will be flexible, precise, reasonable and appropriate, with self-centeredness and stable character at the head, making cross-cyclical adjustments, and overall consideration of policy convergence in the next two years.
The central bank will comprehensively use a variety of monetary policy tools to maintain reasonable and sufficient liquidity and enhance the stability of the growth of total credit. Continue to unleash the effectiveness of the LPR reform, stabilize the cost of bank liabilities, and promote a steady decline in the overall financing costs of small and micro enterprises.
In the context of the central bank’s increased investment scale and precise control of liquidity, the industry generally expects that the funding interest rate in November will remain stable as a whole, with fluctuations in policy interest rates.
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