21st Century Business Herald trainee reporter Tang Jing reported in Beijing
On August 22, 2022, the People’s Bank of China successfully issued two tranches of RMB central bank bills in Hong Kong, including 10 billion yuan of 3-month central bank bills and 15 billion yuan of 1-year central bank bills, with the winning rates of 1.90% and 2.30% respectively. .
The issuance has been widely welcomed by foreign investors, including banks, central banks, funds, insurance companies and other institutional investors in the United States, Europe, Asia and other countries and regions, as well as international financial organizations. , about three times the issuance volume, indicating that RMB assets are more attractive to foreign investors, and also reflects the confidence of global investors in China’s economy.
Central bank bills are short-term bonds issued by the central bank. The central bank adjusts the level of excess reserve deposits of commercial banks by issuing central bank bills to commercial banks. The central bank issues central bank bills to withdraw the base currency, and the expiration of the central bank bills is reflected in the release of the base currency. The issuance of central bank bills will tighten the liquidity of the renminbi in the Hong Kong market, while stabilizing the offshore renminbi exchange rate.
On August 22, data from the China Foreign Exchange Trading Center showed that the central parity rate of the RMB against the U.S. dollar was 6.8198, down 133 basis points, hitting a new low since the end of September 2020. In fact, since the beginning of this year, the central parity rate of the RMB against the US dollar has fallen by 6.97%.
On the same day, the National Interbank Funding Center authorized by the People’s Bank of China announced that the one-year LPR was 3.65%, and the LPR for more than 5 years was 4.3%, which were 5 and 15 basis points lower than the previous period, respectively.
In the offshore market, the offshore RMB exchange rate against the U.S. dollar, which reflects the expectations of international investors, fell below 6.85 in the morning and depreciated by more than 200 points in the day. Since the beginning of this year, the exchange rate of the offshore renminbi against the US dollar has fallen by 7.5%.
The central bank said that at present, the People’s Bank of China has normalized the issuance of RMB central bank bills in Hong Kong, which not only enriches the series of RMB investment products and liquidity management tools in the Hong Kong market, but also drives domestic financial institutions, enterprises and other entities to issue RMB bonds in the offshore market. . In recent years, the number of RMB sovereign bonds, financial bonds and corporate bonds issued in the offshore market has been increasing, and the issuance methods and locations have become increasingly diversified, indicating that Hong Kong’s RMB central bank bills have played a positive role in promoting the development of the offshore RMB market.
Since the beginning of this year, the central bank has issued central bank bills five times
According to the reporter’s statistics, in response to the depreciation of the RMB exchange rate under the Fed’s interest rate hike, the central bank has issued central bank bills five times this year to recover the liquidity of the offshore RMB.
On June 21, 2022, the People’s Bank of China successfully issued 5 billion yuan of 6-month RMB central bank bills in Hong Kong, with an interest rate of 2.30%.
On May 23, 2022, the People’s Bank of China successfully issued two tranches of RMB central bank bills in Hong Kong, including 10 billion yuan of 3-month central bank bills and 15 billion yuan of 1-year central bank bills, with winning rates of 2.49% and 2.80% respectively. .
On March 22, 2022, the People’s Bank of China successfully issued 5 billion yuan of 6-month RMB central bank bills in Hong Kong, with an interest rate of 2.60%.
On February 21, 2022, the People’s Bank of China successfully issued two tranches of RMB central bank bills in Hong Kong, including 3-month central bank bills of 10 billion yuan and 1-year central bank bills of 15 billion yuan. The winning rates were 2.50% and 2.70% respectively. .
It is less likely that the renminbi will repeat the depreciation in the first half of the year
After a phased weakening from April to early May, from late May to early August, the exchange rate of the RMB against the US dollar maintained a two-way range-bound trend. On August 15, after the central bank announced to cut the medium-term lending facility (MLF) and reverse repurchase rates, the yuan weakened again against the dollar. Last week, the yuan depreciated 1.1% against the dollar. Based on the logic of weakening China’s growth expectations, the divergence of monetary policies between China and the United States, and the strengthening of the US dollar index, some market participants are worried that the current devaluation of the renminbi may evolve into a sharp depreciation of the renminbi exchange rate between April and May this year.
In this regard, a research report issued by CICC pointed out that there are many differences between the current internal and external environment and the first half of the year, and the market of the RMB exchange rate may not simply repeat the depreciation market in April-May.
First of all, from the perspective of the internal environment, although the economic data in July was lower than expected, the Chinese economy in the second half of the year has two important differences compared with the first half of the year: First, the impact of the epidemic is relatively mild.Although the epidemic spread and rebounded in July and August due to overseas imports and summer travel, the scale of the epidemic in July-August was smaller than that in April-May. Judging from the location of the epidemic, the current epidemic is basically concentrated in Hainan, Tibet and other provinces, with a relatively limited share of the economy, and the overall disturbance to the Chinese economy is relatively low. At present, the normalized nucleic acid testing in various places has basically taken shape, and the ability to prevent the spread of the epidemic has improved compared with the first half of the year. Therefore, there is a possibility that the marginal disturbance of the epidemic to the economy will gradually decrease.
Secondly, my country’s measures to hedge against the economic downturn have gradually increased.Last week, the MLF was unexpectedly lowered by 10 basis points, reflecting the general trend of gradually increasing the policy after the weak economic data in July. Based on this judgment, the follow-up monetary and fiscal policies will make further efforts to stabilize the economic growth rate within a reasonable range. Taking into account the gradual introduction and force of various stabilizing policies, the probability of my country’s economic expected to gradually improve in the follow-up is even greater.
Third, from the perspective of the external environment, although the current international dollar exchange rate is still relatively strong, the relative stability of my country’s cross-border receipts and payments is expected to ease the depreciation pressure.
Finally, in terms of the absolute level of the exchange rate, the US dollar index is currently at a high level for the year, while the RMB exchange rate has returned to above the long-term average level after the recent adjustment.Compared with the first half of the year, the US dollar index is farther away from the long-term average, while the RMB is closer to the neutral level. Under the influence of the long-term valuation correction force, it is expected that the RMB exchange rate will not simply repeat the depreciation in the first half of the year.
The deputy director of the CITIC Securities Research Institute and the chief FICC analyst Mingming said that the divergence of monetary policies has led to the inversion of the Sino-US interest rate spread, which has caused emotional disturbance to the RMB. Considering that the surplus in the basic account (“current account” + “direct investment”) in the balance of payments can still provide solid support for the RMB, the inversion of the Sino-US interest rate gap after the rate cut has not caused significant foreign capital outflows in the stock and bond markets, and The sequel to the reduced volume of MLF may tighten the short-term liquidity of the RMB. We believe that there is no need to over-trade the impact of the divergence of Sino-US monetary policy and the inversion of Sino-US interest rate differentials on the RMB. After the release of sentiment, the RMB is expected to return to shock.
Wu Zhaoyin, director of macro strategy at AVIC Trust, pointed out to reporters that from the perspective of interest rate parity, there is a possibility that U.S. inflation may have peaked in August, which means that there is limited room for U.S. interest rate hikes, and therefore limited room for the U.S. dollar index to rise. If there is no economic crisis, the US dollar index reaching 109 can be considered as the peak of the stage.
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