(Original title: September MLF equivalent reduction sequel, there is still room for reduction in LPR during the year)
Securities Times reporter He Jueyuan
On September 15, in order to maintain reasonable and sufficient liquidity in the banking system, the People’s Bank of China launched a 400 billion yuan medium-term lending facility (MLF) operation and a 2 billion yuan open market reverse repurchase operation. According to the central bank’s announcement, the PBOC’s 400 billion yuan MLF winning bid rate was 2.75% that day, which is consistent with the operation in August, and since the MLF expiry this month was 600 billion yuan, the same month’s MLF achieved an equivalent reduction in the sequel.
Experts believe that the MLF operating interest rate remained unchanged in September, mainly because the policy effect of the central bank’s unexpected rate cut last month remains to be seen. Considering the recent decline in the cost of bank deposits and the need for stable growth, there is still room for a reduction in the market quoted interest rate (LPR) for loans with a maturity of more than five years during the year.
September MLF equivalent reduction sequel
In September, the MLF operation carried out by the People’s Bank of China was in line with the general market expectations, and the policy interest rate remained unchanged, and continued the volume reduction operation in August.
At present, the policy effect brought by the unexpected rate cut by the central bank in August is still gradually emerging. The loan market quoted rate (LPR) announced on August 22 achieved an asymmetric decline, effectively supporting credit demand. The August financial statistics report released by the People’s Bank of China also shows that the new credit data has picked up, especially in August, the medium and long-term loans of enterprises (institutions) increased by 735.3 billion yuan, reflecting the recovery of enterprises’ willingness to invest and the expansion of production. confidence.
“The effect of the interest rate cut in August was remarkable, and the ‘benefit’ obtained by the real economy will continue in September, so there is no need to continue to lower the policy interest rate in September.” Zhang Xu, chief fixed income analyst at Everbright Securities, said that in August The policy interest rate cut is to enhance the stability of total credit growth and promote the reduction of corporate financing costs, while the MLF volume reduction operation in August and September is to guide the liquidity of the banking system to be stable on the premise of fully meeting the needs of financial institutions. return to normalcy.
Wen Bin, chief economist of Minsheng Bank, also believes that the policy will still be in the observation period in the short term, and the necessity of continuous reduction of MLF is not high. The first is that the current market interest rate has been significantly lower than the policy interest rate for a long time, and the bidding demand for MLF by primary dealers is weak. Secondly, inter-bank liquidity is still abundant, the leverage ratio of the bond market is at a high level, and the central bank’s initiative to increase investment is not strong. Thirdly, the expectation of substantial interest rate hikes by the Federal Reserve and others has been further strengthened, and the importance of stabilizing the exchange rate has increased marginally, restricting the room for domestic interest rate cuts.
Recently, the executive meeting of the State Council deployed and implemented successive policies and measures of the package of policies to stabilize the economy, in an effort to consolidate the foundation for economic recovery and development. In terms of monetary policy, the National Standing Committee proposed to improve the formation and transmission mechanism of market-oriented interest rates, and give play to the guiding role of the loan market quotation (LPR) interest rate.
Pang Ming, chief economist and head of research at Jones Lang LaSalle Greater China, told the Securities Times reporter that the current policy focus should continue to focus on opening up the transmission chain from currency exchange to easing credit, and maintaining stable and moderate growth in money and credit. In order to activate the demand for real loans, ensure stable market sentiment and stable economic recovery slope, it is more important to further reduce the interest rate of loans to the real economy and the comprehensive financing cost of enterprises.
LPR quotation during the year
storage downgrade
Overall, the current economic recovery process is not stable. In August, the year-on-year growth rate of the stock of social financing declined compared with the previous month, and the year-on-year decrease in the incremental scale of social financing expanded compared with the previous month, all showing that the physical demand is still weak.
Wang Qing, chief macro analyst of Dongfang Jincheng, believes that in the later period, focusing on effectively expanding the total macroeconomic demand, there is still room for the MLF operating interest rate to be lowered, and it may be implemented in October at the earliest. Mainly due to unfavorable factors such as the weakening of hedging external demand and the disturbance of the epidemic, it is necessary to continue to introduce phased policy measures such as increasing consumption and expanding investment to ensure that the economy is in a reasonable operating range, and policy interest rate cuts may become one of the alternative policy tools.
Wen Bin believes that the most accommodating period of funds may be over. From the perspective of the supply side, the financial and monetary factors have weakened the support for the capital side. From the demand side, the current physical financing needs are gradually being repaired, which will accelerate the flow of funds to the real economy. Under the combined effect of supply and demand, the capital surface may gradually converge from September. However, he also emphasized that under the background that the current real estate market is still in the doldrums as a whole, the epidemic has repeatedly hampered economic activities, and exports are facing downward pressure, the possibility of excessive and fast tightening of liquidity is not strong.
The policy interest rate remained unchanged in September, which means that the pricing basis for the new round of loan market quotation interest rates has not changed, and the LPR quotation in August has just experienced a decline, and the possibility of a continuous decline in the LPR quotation in September is already low. However, many experts pointed out that there is room for decline in LPR quotations in the second half of the year, the main driving force is the recent decline in the cost of bank deposits.
In Wen Bin’s view, since September 15, many large state-owned banks have adjusted the interest rates of personal deposits again, and the interest rates of many varieties including demand deposits and time deposits have been fine-tuned to varying degrees. Among them, the interest rate of three-year time deposits and large-denomination certificates of deposit was cut by 15 basis points. In the next stage, the decline in deposit rates is expected to further open up space for the LPR to be lowered.