Interbank repo rate continued to drop MLF exceeded expectations to help fund loose

Core Tip: On the 4th, the main repo rate in the interbank market continued to decline, and the funds were relatively loose. The central bank yesterday exceeded the expected MLF operation with a total investment of 437 billion yuan, which will help stabilize the market's expectation of liquidity at the end of the year. However, in line with the “lock-down” operation of the central bank’s open market, the capital fabrics will return to a neutral balance, and it is still necessary to be wary of the time-end tension at the end of the year.

Beijing (CNFIN.COM/XINHUA08.COM) - On November 4th, the main repo rate in the interbank market continued to decline, and the funds were relatively loose. The central bank yesterday exceeded the expected MLF operation with a total investment of 437 billion yuan, which will help stabilize the market's expectation of liquidity at the end of the year. However, in line with the “lock-down” operation of the central bank’s open market, the capital fabrics will return to a neutral balance, and it is still necessary to be wary of the time-end tension at the end of the year.

The bank's overnight pledge repo weighted average interest rate fell 6.98 basis points to 2.1108% in the afternoon; the 7-day interest rate fell 5.764 basis points to 2.2952%; the 14-day interest rate fell 1.74 basis points to 2.4891%. The 1-year loan base rate (LPR) is maintained at 4.30%.

Shanghai Interbank Offered Rate SHIBOR showed that Shibor reported 2.2320% overnight, down 1.30 basis points; 7 days Shibor reported 2.450%, down 0.30 basis points; 3-month Shibor reported 2.8488%, up 0.78 basis points.

Traders said that at the beginning of the month, the pressure on the face of funds was not much, and that MLF put the base currency to raise the level of bank over-storage, and the organization's willingness to short-term funds was stronger. The central bank's current round of MLF operations is expected to be based on the long-term coverage of the MLF period and thus prepare for the rainy season. However, it should be noted that the central bank also has a net return in open market operations. The “lock and short-term” shows that the monetary policy is still relatively neutral, and it will not be overly optimistic about liquidity.

Traders also mentioned that banks and non-bank institutions have recently raised funds, and overnight funds are more than supply. However, the whole week, I feel that the scale of the state-owned big banks is declining. This is also consistent with the central bank’s open market shift to a net return operation. The loosening of funds should not last long.

This morning, the central bank launched a 20-billion-day reverse repurchase operation in the open market, and the winning bid rate was flat at 2.25%. On the same day, there was a 135 billion yuan reverse repurchase period, and a net withdrawal of funds of 115 billion yuan on a single day was a net withdrawal for the third consecutive day. This week, the central bank’s open market has totaled 104.1 billion yuan, and the net investment last week was 595 billion yuan.

The central bank suspended the 14-day and 28-day reverse repurchase operations for the first time since mid-October. According to the analysis of Huachuang Securities Research Institute, the reason why the central bank used MLF to replace reverse repurchase is that the MLF is limited to a higher capital cost, and the cost of capital is increased by “locking short and long” to achieve the initiative to leverage the organization. purpose.

On the occasion of the continued recovery of funds, the central bank unexpectedly carried out the medium-term loan facilitation (MLF) operation on the 3rd, and carried out MLF operations for 21 financial institutions totaling 437 billion yuan, far exceeding the total MLF expired before the end of the year. Among them, 2 months were 230 billion yuan and 1 year was 207 billion yuan. The interest rate was unchanged from the previous period, which was 2.85% and 3.0% respectively.

Huachuang Securities pointed out that the launch of the MLF will correspond to the reduction of the late open market, the trend of capital costs will rise, and the future funding face will still face greater fluctuation risk. The late open market may face a sustained net return.

For the central bank to release medium-term liquidity through the MLF, the industry believes that this can partially replace the role of RRR, which is to offset the decline in foreign exchange holdings and the medium-term liquidity needs of financial institutions. The central bank's MLF operation at this time shows that under the condition that the structural tools are becoming more and more normal, the probability of RRR reduction continues to fall, and the neutral attitude of monetary policy has not changed.

However, Deutsche Bank recently published a research report saying that it is recommended to consider measures such as RRR reduction to resolve potential liquidity risks. The report believes that given the current rising trend in money market interest rates and increased volatility, it is necessary to pay attention to the possibility that this potential risk will be negatively transmitted through the financial system. It is recommended that it is necessary to consider releasing more long-term, low-cost liquidity to the monetary system to prevent the financial market and the economy from being affected by any “immature” liquidity tensions and rising financing costs.

Deutsche Bank analysts said that lowering the deposit reserve ratio is a more effective way to deal with the above liquidity risks. Taking into account the basic liquidity growth required by the monetary system, and the 760 billion yuan MLF that is about to expire between November this year and March next year, Deutsche Bank believes that 50 basis points can be lowered to replace part of the MLF. The central bank’s measures to reduce the RRR or other supply liquidity are not inconsistent with the current policy of tightening credit in real estate.

Industry experts stressed that although the liquidity regulation policy makes structural adjustments, the role of monetary policy in providing a suitable monetary environment for supply-side structural reforms will not change. This means that in order to maintain a reasonable liquidity, the central bank can activate any tool in the monetary policy toolbox at any time.