Original title: The central bank’s RRR cuts landed and the central bank continued to make 100 billion MLF, and the tone of the prudent currency remains unchanged. Source: Economic Reference Network
On July 15th, a full reduction in the RRR landed. At the same time, the central bank implemented a one-year mid-term lending facility (MLF) of 100 billion yuan, with an interest rate of 2.95%. Industry insiders believe that after the RRR cut, the central bank will continue to make 100 billion MLF, which reflects its intention to maintain reasonable and adequate market liquidity. The interest rate of the MLF operation remained unchanged at 2.95%, highlighting the fact that the tone of the prudent monetary policy has not changed.
Earlier, the central bank pointed out in a reporter’s question when announcing the RRR cut that part of the funds released by the RRR cut can be used by financial institutions to return the maturing medium-term loan facility (MLF). Therefore, some investors in the market are expected to no longer conduct MLF operations. However, judging from the situation on the 15th, after the RRR cut, the central bank continued to make 100 billion MLF, and maintained the interest rate level of 2.95% unchanged. In this regard, Chen Jianheng, managing director of the research department of CICC and head of the fixed income research group, said that first of all, the MLF expires in a larger scale during the year, and the continuation of the MLF will help ease the pressure of expiration. According to statistics, from August to the end of the year is the peak of MLF maturity, the total maturity of MLF reached 3.75 trillion yuan, and the average monthly maturity reached 625 billion yuan, a record high. The market still has demand for 1-year MLF. Secondly, the subsequent issuance of government bonds may be faster than before, and the central bank needs to cooperate with the issuance of government bonds to a certain extent. In addition, the follow-up fiscal revenue and expenditure will also bring market liquidity demand, especially the impact of tax factors in July is more obvious. July 15th coincides with the tax payment deadline. Judging from the situation since 2017, the average increase in government deposits in July reached nearly 700 billion yuan. Considering that the current corporate profit is in the recovery period, it is expected that tax payment in July this year will bring The liquidity consumption of the company is likely to be higher than the average level of previous years, which may be more than 700 billion yuan, and it is not even ruled out that it will be higher than the level of 1 trillion yuan in 2017.
“So from these factors, financial institutions still want to supplement some of their liquidity. We expect the central bank will also fully consider the needs of financial institutions for short, medium and long-term funds in the future to maintain reasonable and sufficient market liquidity.” Chen Jianheng said.
At the press conference on financial statistics in the first half of the year held by the State Council Information Office on the afternoon of July 13, the relevant person in charge of the People’s Bank of China stated that the RRR cut is a regular liquidity operation after the return of monetary policy to normal, and a stable monetary policy orientation Nothing has changed.
Chen Jianheng said that from the perspective of interest rates, the MLF operating interest rate still maintains 2.95%, which clearly reveals a signal that the tone of the policy has not changed. From the perspective of the central bank’s guidance, the money market interest rate will be maintained to fluctuate around the policy interest rate. The unchanged MLF interest rate means that the money market interest rate, especially the interbank deposit certificate interest rate, may still maintain the current central level of fluctuations.
Zhang Xu, chief analyst of fixed income at Everbright Securities, also said that in recent years, in order to evolve market expectations and trading behavior in a direction that is conducive to the sustainable development of the macro economy, the central bank has done a lot of homework in terms of policy transparency and expected guidance. For example, the central bank has clarified that the OMO interest rate and the MLF interest rate are short-term and medium-term policy interest rates, respectively, and are focusing on guiding market interest rates to fluctuate around the central bank’s policy interest rate. Therefore, when market entities observe the monetary policy orientation, they only need to see whether the policy interest rate has changed. There is no need to pay too much attention to quantitative indicators or the time value of market interest rates. Today, the MLF interest rate remains at the level of 2.95%, which fully reflects that the orientation of prudent monetary policy has not changed. We investors should also maintain rational expectations of monetary policy.
Wang Qing, chief macro analyst at Oriental Jincheng, also said that under the comprehensive weighing of multiple targets, the policy interest rate is expected to remain stable in the second half of the year. Next, regulators may use more structural policy tools, such as strengthening tax cuts and fee reductions for small and micro enterprises, and moderately expanding inclusiveness, low capital interest rates, and investment in precise re-lending scales, etc., to increase support for the national economy. Targeted drip irrigation in weak links and key support areas, while adhering to the stable and neutral tone of monetary policy.
【Edit: Ye Pan】
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