Our reporter Liu Qi
RRR cut expectations are heating up again. The executive meeting of the State Council (hereinafter referred to as the “National Standing Committee”) held a few days ago proposed to “guide banks to moderately give up the existing loans of inclusive small and micro enterprises, continue to provide financial services for transportation and logistics, and increase support for private enterprises to issue bonds. Use monetary policy tools such as RRR cuts to maintain reasonable and sufficient liquidity.”
Judging from past experience, after the National Standing Committee “announces” the RRR cut, it will generally be implemented in a short period of time. Taking the most recent example, after the National Standing Meeting held on April 13 proposed “timely use of monetary policy tools such as RRR cuts”, the central bank announced on April 15 that it would cut the deposit reserve ratio of financial institutions by 0.25 percentage points on April 25. .
“The National Standing Committee mentioned the RRR cut, which released a signal that the macro policy will increase its efforts to stabilize growth, which will help boost market confidence, hedge the impact of the epidemic on economic operations, and help stabilize growth and employment at the end of this year and early next year.” Wang Qing, chief macro analyst of Oriental Jincheng, told the reporter of “Securities Daily” that the current domestic price stability, coupled with the rich regulatory tools of the foreign exchange market at the regulatory level, the RMB has the ability to maintain strong resilience, which means that the domestic monetary policy has the conditions to “take me as the host”. At the same time, it is expected that in the next one to two weeks, the central bank will officially announce the implementation of the RRR cut.
In addition, with the recent increase in volatility in the bond market, the National Standing Committee’s release of the RRR cut signal at this time is also conducive to stabilizing bond market expectations.
Ming Ming, chief economist of CITIC Securities, said that in mid-November, due to multiple factors, the bond market adjusted widely. On November 14, the 10-year treasury bond interest rate rose by 10 basis points in a single day, the highest in the year. The sharp adjustment of the interest rate bond market has caused wide fluctuations in the net value of debt bases and wealth management products, and the impact of pessimistic expectations has triggered a “redemption wave” of wealth management products.
“The relative tightening of liquidity is one of the main reasons for this round of bond market adjustments. For this reason, the central bank has increased the volume of reverse repurchase several times last week to hedge against the pressure of tightening funds. The maximum daily release volume reached 172 billion yuan. Here In the background, the interest rate of funds has shown signs of stabilization and decline.” Mingming believes that the current bond market adjustment has not yet been completely completed, and the National Standing Committee has chosen to release the RRR cut signal at this time, which is also to stabilize bond market expectations and prevent the formation of “pessimistic expectations-redemption Financial management—weaker market—more pessimistic expectations” vicious circle.
Regarding the magnitude of the possible RRR cut, Wen Bin, chief economist of Minsheng Bank, said in an interview with the “Securities Daily” reporter that it may be the same as in April, at 0.25 percentage points. Currently, interest rate cuts are constrained by U.S. monetary policy to a certain extent, and RRR cuts have become a more feasible policy tool. In recent years, RRR cuts have become a routine operation. Its main purpose is to maintain a reasonable and sufficient liquidity, and it also has the function of counter-cyclical adjustment: first, to cooperate with fiscal policies and help accelerate the issuance of special bonds; second, to reduce the cost of bank funds and guide LPR (quoted interest rate in the loan market) will go down; the third is to promote banks to increase capital investment and accelerate credit expansion.
Wang Qing predicts that this RRR cut will be a comprehensive RRR cut, with a range of 0.5 percentage points, releasing about 1.2 trillion long-term funds, and part of the RRR cut funds may be used to replace mature MLF to optimize bank liquidity. sexual structure. Considering that the National Standing Committee made it clear that the main purpose of this RRR cut is to “maintain reasonable and sufficient liquidity”, it is unlikely to implement targeted RRR cuts.
If the RRR reduction is implemented in a short period of time, Wang Qing believes that the probability of LPR reduction in December with a period of more than 5 years will increase significantly. In addition to the effect of liquidity delivery, RRR cuts also have the effect of reducing the cost of funds for banks. Superimposed on the fact that commercial banks have launched a new round of deposit rate cuts since September, it can be judged that the probability of LPR cuts over 5 years in December is very high.
[Responsible editor: Cao Jing]