Liquidity operations: non-stop since the second half of the month
The central bank announced on the 23rd that 100 billion yuan of reverse repurchase operations were carried out on that day, including 20 billion yuan in seven-day period, 2.55% in operating interest rate, 80 billion yuan in 14-day period and 2.7% in operating interest rate. The interest rate remained unchanged. This is the fourth consecutive working day for the central bank to carry out counter-repurchase operations.
Since the second half of September, central bank liquidity operations have not stopped. On the 16th, the central bank lowered its benchmark and released about 800 billion yuan of long-term liquidity; on the 17th, the central bank renewed its medium-term lending facility (MLF) for the first time since September; on the 18th, the open market reverse repurchase operation was restarted; and on the 19th, the 14-day reverse repurchase transaction was restarted.
According to statistics, since the 16th, the central bank has carried out a total of 420 billion yuan of reverse repurchase operations, 200 billion yuan of MLF operations, and reduced the release of funds by about 800 billion yuan. Taking into account, in the past week, the central bank released about 1.42 trillion yuan of liquidity through various liquidity instruments. After absorbing the expired central bank counter-repurchase and MLF, the net amount of funds released is still close to 900 billion yuan.
In the past, before and after the benchmark reduction, the central bank usually used the Open Market Operation (OMO) to withdraw funds, in order to avoid the benchmark reduction resulting in excessive short-term liquidity. After this comprehensive reduction, it is rare for the central bank to simultaneously put liquidity into the market through open market operations.
High Interest Rate: Liquidity Faces Disturbance
On September 20, DR007, the most representative monetary market interest rate indicator in the market, rose to 2.8%, hitting a new high in more than two months, providing an explanation for the recent operation of the central bank.
The liquidity of Chinas banking system shows a certain seasonal fluctuation law. In recent years, seasonal factors such as fiscal revenue and expenditure, the payment and refund of statutory deposit reserve of financial institutions, cash deposit and withdrawal, quarterly financial supervision and assessment have enlarged their influence on liquidity, and different factors are easy to overlap. For example, liquidity tends to tighten in the middle of each month due to the impact of fiscal taxes and other factors; in the latter part of the month, liquidity tends to recover due to the liquidity of financial expenditure supply. At the end of the season, the situation is more complicated. Supervision and assessment have an impact on market expectations and institutional behavior, which can easily cause short-term financial tension. China Securities Journal reporters counted all the historical data of DR007, and found that the end of September in the past three years was higher than the end of August, with an average of 23 basis points higher.
It should be noted that the central bank has demonstrated a reasonable and abundant attitude to maintain liquidity through large-scale liquidity operations. This week, the central bank may continue to carry out counter-repurchase operations in an appropriate amount. In addition, near the end of the quarter, fiscal expenditure is expected to increase, forming an increase in the supply of funds, the total liquidity is guaranteed. DR001 dropped 6 basis points to 2.74% on the 23rd. As the cumulative effect of the central banks continued large-scale investment shows, there are signs of a revival in the capital level.
Stock and Bond Market: Opportunities for Pain
On the 23rd, the A-share market adjusted and the bond market shook narrowly. Signs of a slowdown in global economic growth have depressed risk appetite in financial markets, dragged down stock markets in Asia-Pacific and Europe, and affected A shares. However, combined with bond market analysis, the adverse impact of short-term liquidity volatility on asset valuation seems to be reflected.
Analysts pointed out that in the past, during the liquidity tightening period, the stock and bond market is often difficult to perform well, and it is still necessary to guard against valuation pressures caused by liquidity fluctuations before the end of the quarter. However, the current liquidity tightening is not sustainable and its impact should be limited.
In early October, liquidity tended to pick up, which is more certain, and the opportunities it may bring deserve attention. Firstly, the comprehensive reduction releases a lot of long-term liquidity; secondly, the open market operation of the central bank makes it possible to achieve net investment in September; lastly, September is the month of traditional fiscal expenditure, and fiscal treasury funds will form liquidity investment. This means that by the end of September, the overstock size of financial institutions is expected to be significantly higher than that at the end of August. In early October, with the end-of-season disturbance subsided, the increase in total liquidity is expected to be more fully reflected in the degree of tightening of money markets and the trend of capital prices.
Analysts point out that the first half of October is expected to be relatively loose, and the price of funds is expected to fall significantly. At that time, both stocks and bonds will face a favorable financial environment.
Source: Liable Editor of China Securities News: Yang Bin_NF4368