On July 17, in order to maintain reasonable and sufficient liquidity in the banking system, the People's Bank of China launched a 103 billion yuan medium-term lending facility (MLF) operation and a 33 billion yuan open market reverse repurchase operation, which fully met the needs of financial institutions. This month's MLF bid rate and open market reverse repurchase bid rate were the same as the previous period, respectively 2.65% and 1.9%.
Since 100 billion yuan of MLF and 2 billion yuan of 7-day reverse repurchase expired on that day, MLF achieved a small increase in volume and parity in July, and the net investment in the public market was 34 billion yuan that day.
The interviewed experts generally believe that the MLF increase plan for this month is relatively low, mainly because the liquidity of the banking system was relatively abundant at that time, and the release of liquidity was more to cope with the acceleration of local government bond issuance this month and the possible impact on funds of tax payment. disturbance.
According to Wind data, since July, the weighted average interest rate (DR007) of 7-day pledged repurchase between banks has continued to be below the 7-day reverse repo rate, and the yield to maturity of 1-year commercial bank (AAA grade) interbank certificates of deposit is also at the MLF rate below. Wang Qing, the chief micro analyst of Dongfang Jincheng, told reporters that since July, the market capital interest rate and the yield to maturity of major interbank certificates of deposit have been running below the corresponding target interest rates, which means that the liquidity of the banking system is relatively abundant at that time, and MLF does not need to be increased. "Hydration".
On the other hand, the arrival of the tax declaration period in July and the acceleration of local bond issuance will affect liquidity. Wen Bin, Chief Economist of Minsheng Bank, pointed out to reporters that as a traditional tax payment month, the impact of fiscal revenue and expenditure on the capital side is still in July. At the same time, the issuance of local bonds has accelerated since the third quarter. With the increase in government deposits, a certain amount of liquidity will also be withdrawn from the market. For this reason, MLF and open market reverse repurchase small-amount continuation will help alleviate the pressure on the capital side.
Next, the amount of MLF maturity will increase from August. Wind data shows that the MLF maturity scale reached 2.8 trillion yuan from August to December. Wen Bin pointed out that with the increase of MLF maturities in each month and the effect of steady growth, the plan for MLF incremental sequels is expected to increase, and the possibility of RRR cuts in the second half of the year will promote the process of widening credit.
After the MLF interest rate and open market reverse repurchase interest rate were cut in June, the target interest rate remained unchanged this month in line with market expectations. Since LPR (Loan Market Quote Rate) is formed by adding points to the MLF interest rate, the new round of LPR quotes this month will most likely remain unchanged.
"The urgency to reduce the MLF interest rate in the second half of the year is not strong." Zhang Xu, chief fixed income analyst at Everbright Securities, told reporters that the interest rate cut in June has achieved good results, and the urgency for the target interest rate to decline again at that time was low. In the second half of this year, the People's Bank of China will most likely use the RRR cut tool to provide low-cost long-term liquidity to the banking system.
Hong Kong United Securities also stated that in the second half of the year, the price level and RMB exchange rate elements will have more limited constraints on monetary policy. From the perspective of increasing the intensity of micro-policy regulation, the probability of subsequent RRR cuts is greater than that of interest rate cuts. In order to promote the steady and moderate reduction of financing costs in the real economy, RRR cuts may be implemented in the third quarter.