50 billion yuan reverse repurchase operation hit a single-day high since February 9
Maintain reasonable and adequate liquidity, the central bank’s “toolbox” reserves sufficient
The People’s Bank of China launched a 7-day reverse repurchase operation of 50 billion yuan on August 25. The operation volume hit a single-day high since February 9, and the winning bid rate remained unchanged at 2.20%. Due to the expiration of 10 billion yuan in reverse repurchase, a net investment of 40 billion yuan was realized on the 25th.
Experts believe that the high volume of reverse repurchase reflects the central bank’s intention to maintain a reasonable and abundant market liquidity at the end of the month. The market generally believes that there is a certain gap in funding at present, and it is expected that the central bank will adopt open market operations and other methods to hedge liquidity pressures. The possibility of a RRR cut in the fourth quarter is not ruled out.
Open market operations are heavy
Wind data shows that on August 25 the inter-bank market interest rates rose, indicating that liquidity has tightened. On the same day, the Shibor overnight rate was reported at 2.21%, an increase of 27 basis points from the average of last week (16th to 20th). As of 17:00 on the 25th, the weighted price of DR007 was reported at 2.32%, which was about 14 basis points higher than the 5-day average. In addition, the average issuance rate of interbank certificates of deposit this week was 2.6163%, a decrease of 1 basis point from last week.
In order to maintain stable liquidity at the end of the month, the central bank launched a 50 billion 7-day reverse repurchase operation by way of interest rate bidding on the 25th, and the winning interest rate was 2.20%. In terms of scale, this is the largest scale of reverse repurchase carried out in a single day since February 9.
This week (23-27), a total of 50 billion yuan of reverse repurchase expires. Currently, the central bank has carried out 70 billion yuan of reverse repurchase operations. Market participants believe that this reflects the central bank’s intention to maintain stable market liquidity at the end of the month and will be disclosed later. Market operations are still worth looking forward to.
Sun Binbin, chief analyst of Tianfeng Securities’ fixed income, believes that since the beginning of this year, the central bank has further improved the accuracy and effectiveness of monetary policy operations, smoothed out short-term fluctuations such as cash injection, fiscal taxation, and quarter-end in a timely manner, and guided short-term interest rates in the money market to be open. The market’s 7-day reverse repurchase operation interest rate has been operating within a reasonable range, maintaining the stability of market liquidity.
Funds are under pressure
The industry believes that there is a certain gap in current funding. On July 15, the central bank lowered the deposit reserve ratio of financial institutions by 0.5 percentage points, but there was no significant easing of funds after the RRR cut. In the future, under the influence of factors such as the continuous increase of government bond issuance and the maturity of interbank certificates of deposit, the funding may be tightened in stages.
Guotai Junan’s chief macro analyst Dong Qi said that in July, the RRR was cut across the board, but other monetary policy tools did not cooperate with the release of liquidity, and the overall monetary environment is still in a state of inadequate overflow.
Li Yishuang, chief fixed-income analyst at Cinda Securities, predicts that under the central bank’s tone of maintaining reasonable and sufficient liquidity, the risk of a substantial rise in the capital interest rate center is not high. If it is affected by factors such as the centralized issuance of local bonds, it is not ruled out that the capital will appear staged. Tightening situation.
Policy interest rate will remain stable
Looking forward to open market operations for a period of time in the future, Sun Binbin said that the central bank is expected to carry out sufficient liquidity hedging for the supply of local debt issuance and the large-scale maturity pressure of MLF, but the overall price should be balanced. “Because we need to maintain normal operation and manage the currency gate, the policy interest rate may not be adjusted.” He said.
According to Dong Ximiao, chief researcher of China Merchants Union Finance, the liquidity is expected to be appropriately increased in the second half of the year, and the RRR cut can be expected.
Some experts also believe that under the background that cross-cyclical regulation and policy hedging have begun to exert force, whether the future will continue to lower the RRR and lower the LPR still needs further observation.
“The medium-term policy interest rate represented by the MLF operating interest rate is expected to remain unchanged, and there is little possibility of a’double cut (reduced reserve rate + policy rate cut)’ in the future.” Wang Qing, chief macro analyst at Oriental Jincheng, believes that Small and micro enterprises in the middle and lower reaches need monetary policy “support”. One of the specific measures is to guide the real economy’s loan interest rate to fall steadily, and to hedge the operating pressure of small and micro enterprises caused by rising raw material costs.