Can the MLF interest rate remain unchanged for 9 consecutive months without a “rate cut” and finally be lowered?The latest interpretation of the organization is here

11:22【There is no “rate cut” MLF interest rate has remained unchanged for 9 consecutive months, can it be finally lowered? The latest interpretation of the agency is here]Today, the central bank conducts a 125 billion yuan one-year MLF operation, and the winning bid rate is 2.75%. The MLF operation rate has not changed. Since last August, the central bank lowered the bid interest rates for MLF operations and open market reverse repurchase operations by 10 basis points. This is the ninth consecutive month that the MLF interest rate has remained unchanged.

Whether the central bank will cut interest rates has become the core focus of the market. On the news, the current 1YAAA-level CD interest rate and the 10Y treasury bond yield have dropped to 2.43% and 2.71% respectively, both of which are already below the 1YMLF interest rate of 2.75%. In addition, according to previous news from Yicai, relevant departments notified banks to lower the self-regulatory upper limit of agreement deposit and call deposit interest rates. What is the future trend of MLF interest rate? The latest interpretation of the organization is here:

Huachuang Securities believes that there must be expectations of interest rate cuts, and the market has already traded part of the rate cuts. The 10-year national debt is lower than the MLF of 2.75%. But it is difficult to assess how much the market has already implied the expected rate cut. Because even if interest rates are not cut or raised, the previous market has fully proved that the 10-year national debt fluctuates around the MLF: when the economy is good, the 10-year national debt can be above the MLF. For example, in the first quarter of this year, the market was optimistic about the economy, and the 10-year national debt exceeded MLF, at this time the market certainly has no expectations of raising interest rates; when the economy is in a downturn, even if interest rates are not cut, the 10-year national debt can still be lower than MLF.

Everbright Securities stated that the MLF interest rate is the central bank’s policy interest rate, which will guide the market interest rate. It is believed that the market interest rate will force the policy interest rate to fall, which is to reverse the causal relationship. From an empirical point of view, the yields of 1YCD and 10Y treasury bonds basically fluctuate around the MLF interest rate, and the market interest rate is often slightly lower than the policy interest rate, but “below” does not necessarily correspond to a cut in the MLF interest rate. Second, under the current circumstances, there is a certain degree of separation between the deposit market and 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 lowered the interest rates of some deposits. This is not a sufficient condition for MLF to cut interest rates. At present, the central bank does not need to supply a large amount of MLF funds to guide the CD interest rate to decline significantly. In fact, today’s operating volume of 125 billion yuan can fully meet the needs of financial institutions. It is worth noting that the easing of funds since the beginning of May is an important reason for the decline in the yield of 10Y government bonds. But what we need to emphasize is that there are many factors that have led to the decline in the funding rate since the beginning of the month, including certain seasonal factors.

Dongfang Jincheng said that whether the MLF interest rate can be lowered in the end will mainly depend on the momentum of economic recovery in the later period. Historical data shows that the decline in market interest rates is not a reliable indicator of policy interest rate cuts. If there is a relatively large downward fluctuation in the momentum of economic recovery in the future, the possibility of interest rate cuts on the policy agenda cannot be completely ruled out, but the probability of MLF interest rate cuts in the short term is not high. After the implementation of the RRR cut in March and the new arrangement of 1.2 trillion tax and fee reduction measures, the overall macro policy in the second quarter will be in an “observation period”. The focus is to increase the implementation of existing measures and closely observe the macroeconomic recovery situation. Especially real estate market trends.