The central bank rarely hedges MLF with a large amount of reverse repurchase at the beginning of the month with a high probability of this month | Reverse Repurchase

Original title: The central bank rarely hedges MLF with large-amount reverse repurchase at the beginning of the month with a high probability of this month Source: Securities Daily

Our reporter Liu Qi

Since November, the People’s Bank of China (hereinafter referred to as the “central bank”) has carried out reverse repurchase operations for 7 days for 5 consecutive working days. On November 1st and November 2nd, the central bank carried out 10 billion yuan reverse repurchase operations respectively. Since November 3, heavy operations have been carried out. The amount of reverse repurchase operations on November 3 and November 4 was both 50 billion yuan, and it was further increased to 100 billion yuan on November 5. Operating interest rates remained unchanged at 2.2%.

In the past, financial institutions’ funding needs were relatively low at the beginning of the month, and the banking system’s liquidity was usually relatively abundant. Except for the month of the Spring Festival, the central bank’s reverse repurchase operations at the beginning of the month were dominated by small amounts such as 10 billion yuan. Therefore, three consecutive days of large reverse repurchase operations this week are quite “rare.” According to the “Securities Daily” reporter combed, from November 1 to November 5, the central bank launched a total of 220 billion yuan of reverse repurchase funds, and the amount of reverse repurchase maturity funds amounted to 100 billion yuan during the same period, achieving a net return of 780 billion yuan.

Regarding the central bank’s increase in reverse repurchase efforts at the beginning of the month, Tao Jin, deputy director of the Macroeconomic Research Center of the Suning Institute of Finance, analyzed in an interview with a reporter from the Securities Daily that this may be mainly due to the relatively large issuance of government bonds in November. This month, there is still a net financing amount of 300 billion yuan in treasury bonds and 700 billion yuan in special bonds, resulting in a liquidity “pumping” of 1,000 billion yuan, which puts greater pressure on the liquidity of large banks. The increase in liquidity investment also reflects that the liquidity policy is undergoing marginal adjustments, while the forward-looking and timeliness of the policy continues to be strengthened.

　　Bank of ChinaWang Youxin, a senior researcher of the Institute, believes that the central bank has continuously increased the scale of reverse repurchase operations in the past three days, mainly to hedge against repurchase maturity and external market fluctuations to ensure reasonable and sufficient liquidity.

“Recently, driven by the expected normalization of the Federal Reserve’s monetary policy, short-term interest rates in the United States have gradually risen, and domestic and foreign interest rates have narrowed.” Wang Youxin told a reporter from Securities Daily that expanding the scale of reverse repurchase operations can stabilize the potential market. Volatility risk.

From the perspective of domestic interest rate trends, whether it is Shibor (Shanghai BankInterbank Offered Rate) or DR007(Inter-bank deposit financial institutions use interest rate bonds as pledge of 7-day repo interest rates) The trend is basically stable. According to data from the National Interbank Funding Center, on November 5, the overnight Shibor was 1.887%, and the 7-day Shibor was 2.129%. The 5-day average and 10-day average of the former were 1.9858% and 1.9088%, respectively; the 5-day average and 10-day average of the latter were 2.1502% and 2.2124%, respectively. As of 16:30 on November 5th, the weighted average interest rate of DR007 was 2.124%, which was lower than the 7-day reverse repurchase operation interest rate.

Regarding liquidity disturbance factors in November, Tao Jin believes that in addition to conventional factors such as tax payment, government bond issuance is also a major disturbance factor. In addition, shopping consumption in November is relatively concentrated, and there is also a lot of demand for cash. The central bank incorporated changes in liquidity and timely carried out reverse repurchase operations to ensure sufficient short-term liquidity. The current fiscal expenditure is far behind the scale and progress of the fiscal budget deficit arrangement. It is expected that fiscal expenditure will accelerate in the fourth quarter, and the formation of bank deposits is expected to ease the pressure on liquidity. At the same time, if the pace of use of local government bond funds is relatively slow, the resulting fiscal deposits will also increase liquidity.

Looking forward to the later stage, from November 8th to November 12th, 220 billion yuan of reverse repurchase funds will expire in the open market; on November 16 and November 30, there will be 200 billion yuan and 800 billion yuan respectively. The loan facility (MLF) expires. Under this circumstance, will the central bank “overweight” the amount of funds when it carries out the MLF operation in November?

Wang Youxin predicts that the central bank will continue to make the same amount of MLF, and the operating interest rate is expected to remain unchanged to ensure market liquidity and stable fluctuations in interest rates.

Tao Jin also believes that the central bank may conduct a one-off hedge against the two MLFs due this month. The scale is probably equal and full continuation, that is, 100 billion yuan, so as to avoid the centralized issuance of government bonds. , MLF maturity will have an additional impact on medium and long-term liquidity. At the same time, there is a high probability that the operating interest rate will not be adjusted. On the one hand, it is not necessary to reduce the interest rate to promote the obvious expansion of credit; on the other hand, the financing cost of the real economy has been continuously declining due to the relatively small credit expansion and financing demand. , There is little need for active interest rate cuts.

Editor in charge: Li Tong